UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30~~March 31, ~~2017~~2018

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 0-51952

ALLIANCE HOLDINGS GP, L.P.

(Exact name of registrant as specified in its charter)

Delaware	03-0573898
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

1717 South Boulder Avenue, Suite 400, Tulsa, Oklahoma 74119

(Address of principal executive offices and zip code)

(918) 295-1415

(Registrant’'s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ X ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [ ]	Accelerated Filer [ X ]	Non-Accelerated Filer [ ]	Smaller Reporting Company [ ]
		(Do not check if smaller reporting company)
Emerging Growth Company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

As of ~~November 6~~May 7, ~~2017~~2018, 59,863,000 common units are outstanding.

Table of Contents

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
		Page
ITEM 1.	Financial Statements (Unaudited)
	ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES
	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	1
	Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	1
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016	2
	Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	4
	Notes to Condensed Consolidated Financial Statements	5
ITEM 2.	Management’'s Discussion and Analysis of Financial Condition and Results of Operations	2726
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	4135
ITEM 4.	Controls and Procedures	4236
	Forward Looking Statements	4438
PART II
OTHER INFORMATION
ITEM 1.	Legal Proceedings	4640
ITEM 1A.	Risk Factors	4640
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4640
ITEM 3.	Defaults Upon Senior Securities	4640
ITEM 4.	Mine Safety Disclosures	4640
ITEM 5.	Other Information	4640
ITEM 6.	Exhibits	4741

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2230,~~571~~700	$	448,~~525~~643
Trade receivables		~~129~~157,~~031~~798		~~152~~181,~~032~~671
Other receivables		~~709~~229		~~279~~146
Due from affiliates		2711		3725
Inventories, net		8783,~~667~~944		6160,~~051~~275
Advance royalties, net		12,~~207~~856		14,~~207~~510
Prepaid expenses and other assets		1019,~~488~~864		2228,~~128~~192
Total current assets		~~251~~295,~~700~~402		~~281~~283,~~259~~462
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost		2,~~938~~983,~~362~~666		2,~~920~~934,~~988~~188
Less accumulated depreciation, depletion and amortization		(1,~~436~~520,~~470~~732)		(1,~~335~~457,~~145~~532)
Total property, plant and equipment, net		1,~~501~~462,~~892~~934		1,~~585~~476,~~843~~656
OTHER ASSETS:
Advance royalties, net		4050,~~578~~800		2939,~~372~~660
Equity investments in affiliates		144,349		138,817
Equity method investments		158,669		147,964
Cost investments		102,800		—
Equity securities		110,122		106,398
Goodwill		136,399		136,399
Other long-term assets		3330,~~041~~442		2530,~~997~~712
Total other assets		~~457~~486,~~167~~432		~~330~~461,~~585~~133
TOTAL ASSETS	$	2,~~210~~244,~~759~~768	$	2,~~197~~221,~~687~~251
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable	$	7493,~~289~~577	$	6497,~~460~~371
Due to affiliates		~~759~~—		~~906~~771
Accrued taxes other than income taxes		20,~~578~~307		1820,~~288~~366
Accrued payroll and related expenses		4134,~~124~~530		4135,~~576~~801
Accrued interest		1312,~~083~~499		~~316~~5,005
Workers' compensation and pneumoconiosis benefits		910,~~732~~769		910,~~897~~729
Current capital lease obligations		28,~~220~~948		2728,~~196~~613
Other current liabilities		16,~~697~~732		1419,~~778~~071
Current maturities, long-term debt, net		~~100~~40,000		~~149~~72,~~874~~400
Total current liabilities		~~304~~257,~~482~~362		~~327~~290,~~291~~127
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net		~~385~~386,~~449~~703		~~399~~415,~~446~~937
Pneumoconiosis benefits		6472,~~197~~509		6271,~~822~~875
Accrued pension benefit		3942,~~497~~906		4245,~~070~~317
Workers' compensation		5246,~~477~~861		4046,~~400~~694
Asset retirement obligations		~~125~~126,~~146~~287		~~125~~126,~~266~~750
Long-term capital lease obligations		6450,~~358~~634		8557,~~540~~091
Other liabilities		1620,~~248~~055		1714,~~203~~587
Total long-term liabilities		~~747~~745,~~372~~955		~~772~~778,~~747~~251
Total liabilities		1,~~051~~003,~~854~~317		1,~~100~~068,~~038~~378
PARTNERS’ CAPITAL:
Alliance Holdings GP, L.P. ("AHGP") Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding		~~623~~685,~~614~~127		~~598~~626,~~077~~831
Accumulated other comprehensive loss		(2534,~~270~~087)		(1634,~~550~~820)
Total AHGP Partners' Capital		~~598~~651,~~344~~040		~~581~~592,~~527~~011
Noncontrolling interests		~~560~~590,~~561~~411		~~516~~560,~~122~~862
Total Partners’ Capital		1,~~158~~241,~~905~~451		1,~~097~~152,~~649~~873
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	2,~~210~~244,~~759~~768	$	2,~~197~~221,~~687~~251

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

(Unaudited)

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
SALES AND OPERATING REVENUES:
Coal sales	$	~~435~~423,~~162~~610	$	~~533~~438,~~817~~744	$	~~1,256,168~~	$	~~1,357,578~~
Transportation revenues		819,~~009~~785		79,~~692~~596		~~24,933~~		~~19,732~~
Other sales and operating revenues		913,~~916~~641		1012,~~457~~665		~~31,610~~		~~26,422~~
Total revenues		~~453~~457,~~087~~036		~~551~~461,~~966~~005		~~1,312,711~~		~~1,403,732~~
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)		~~295~~277,~~385~~238		~~326~~262,~~891~~027		~~796,845~~		~~842,417~~
Transportation expenses		819,~~009~~785		79,~~692~~596		~~24,933~~		~~19,732~~
Outside coal purchases		—1,374		~~1,514~~—		—		~~1,514~~
General and administrative		1517,~~389~~145		1816,~~987~~447		~~47,160~~		~~55,175~~
Depreciation, depletion and amortization		6961,~~962~~848		~~101~~65,~~432~~127		~~194,109~~		~~245,736~~
Total operating expenses		388,745		456,516		1,063,047		1,164,574
Settlement gain		(80,000)		—
INCOME FROM OPERATIONS		64,342		95,450		249,664		239,158
Total operating expenses		297,390		353,197
Interest expense (net of interest capitalized for the three and nine months ended September 30, 2017 and 2016 of $107, $47, $354 and $320, respectively)		(10,773)		(8,001)		(28,904)		(23,386)
INCOME FROM OPERATIONS		159,646		107,808
Interest income		6		3		87		11
Interest expense (net of interest capitalized for the three months ended March 31, 2018 and 2017 of $265 and $81, respectively)		(10,858)		(7,516)
Equity in income of affiliates		3,798		1,105		10,414		1,041
Interest income		68		25
Cost investment income		2,800		—		2,800		—
Equity method investment income		3,736		3,700
Debt extinguishment loss		—		—		(8,148)		—
Equity securities income		3,724		—
Other income		774		293		2,461		545
Other (expense) income		(847)		533
INCOME BEFORE INCOME TAXES		60155,~~947~~469		88104,~~850~~550		~~228,374~~		~~217,369~~
INCOME TAX EXPENSE (BENEFIT)		4		6		(3)		4
INCOME TAX EXPENSE		(10)		(12)
NET INCOME		60155,~~943~~479		88104,~~844~~562		~~228,377~~		~~217,365~~
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(2151,~~821~~759)		(4049,~~337~~551)		~~(91,661)~~		~~(92,643)~~
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP")	$	39103,~~122~~720	$	4855,~~507~~011	$	~~136,716~~	$	~~124,722~~
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT	$	01.6573	$	0.8192	$	~~2.28~~	$	~~2.08~~
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT	$	0.737425	$	0.55	$	~~1.83~~	$	~~2.06~~
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED		59,863,000		59,863,000		~~59,863,000~~		~~59,863,000~~

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

~~Nine Months Ended~~

September 30,

March 31,

2017

2016

2017

2016

2018

2017

NET INCOME

60155,~~943~~479

88104,~~844~~562

~~228,377~~

~~217,365~~

OTHER COMPREHENSIVE INCOME (LOSS):

Defined benefit pension plan:

Amortization of prior service cost (1)

4647

—47

~~140~~

—

Amortization of net actuarial loss (1)

~~774~~969

~~787~~773

~~2,319~~

~~2,365~~

Total defined benefit pension plan adjustments

~~820~~1,016

~~787~~820

~~2,459~~

~~2,365~~

Pneumoconiosis benefits:

Amortization of net actuarial gain (1)

(479)

(660)

(1,613)

(1,982)

Amortization of net actuarial loss (gain) (1)

(567)

Total pneumoconiosis benefits adjustments

~~(479)~~1

(~~660~~567)

~~(1,613)~~

~~(1,982)~~

OTHER COMPREHENSIVE INCOME

341

127

846

383

OTHER COMPREHENSIVE INCOME (LOSS)

1,017

253

COMPREHENSIVE INCOME

61156,~~284~~496

88104,~~971~~815

~~229,223~~

~~217,748~~

Less: Comprehensive income attributable to noncontrolling interests

(2152,~~957~~043)

(4049,~~410~~649)

~~(92,039)~~

~~(92,827)~~

COMPREHENSIVE INCOME ATTRIBUTABLE TO AHGP

39104,~~327~~453

4855,~~561~~166

~~137,184~~

~~124,921~~

(1) Amortization of prior service cost and net actuarial gain or loss is included in the computation of net periodic benefit cost (see Notes 1011 and 1213 for additional details).

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2017		2016
	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES:	$	~~454~~224,~~818~~311	$	~~491~~176,~~960~~552
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures		(~~105~~51,~~455~~525)		(7030,~~267~~346)
Increase (decrease) in accounts payable and accrued liabilities		~~4,182~~(15)		(72,~~965)~~144
Proceeds from sale of property, plant and equipment		~~1,488~~7		~~756~~453
Contributions to equity investments in affiliates		(16,487)		(65,367)
Contributions to equity method investments		(11,400)		(9,287)
Purchase of cost investment		(100,000)		—
Distributions received from investments in excess of cumulative earnings		736		1,191
Distributions received from investments in excess of cumulative earnings		10,880		2,167
Net cash used in investing activities		(62,197)		(35,845)
Payment for acquisition of business		—		(1,011)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for acquisition of customer contracts		—		(23,000)
Borrowings under securitization facility		37,600		—
Net cash used in investing activities		(205,392)		(164,687)
Payments under securitization facility		(70,000)		—
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		70,000		—
Borrowings under securitization facility		100,000		44,600
Payments under revolving credit facilities		(100,000)		(25,000)
Payments under securitization facility		(100,000)		(27,700)
Payments on capital lease obligations		(6,974)		(6,678)
Payments on term loan		(50,000)		(106,250)
Payment of debt issuance costs		—		(6,664)
Borrowings under revolving credit facilities		165,000		140,000
Contributions to consolidated company from affiliate noncontrolling interest		—		251
Payments under revolving credit facilities		(420,000)		(215,000)
Net settlement of withholding taxes on ARLP’s issuance of units in deferred compensation plans		(2,081)		(2,988)
Borrowings under long-term debt		400,000		—
Contribution by limited partner - affiliate		—		800
Payment on long-term debt		(145,000)		—
Distributions paid by consolidated partnership to noncontrolling interests		(23,257)		(19,810)
Proceeds on capital lease transactions		—		33,881
Distributions paid to Partners		(44,449)		(32,925)
Payments on capital lease obligations		(20,186)		(17,769)
Other		(896)		(190)
Payment of debt issuance costs		(16,221)		—
Net cash used in financing activities		(140,057)		(93,204)
Payment for debt extinguishment		(8,148)		—
NET CHANGE IN CASH AND CASH EQUIVALENTS		22,057		47,503
Contributions to consolidated company from affiliate noncontrolling interest		251		2,557
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		8,643		44,525
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan		(2,988)		(1,336)
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	30,700	$	92,028
Contribution by limited partner - affiliate		800		—
SUPPLEMENTAL CASH FLOW INFORMATION:
Distributions paid by consolidated partnership to noncontrolling interests		(62,143)		(69,680)
Cash paid for interest	$	2,995	$	4,708
Distributions paid to Partners		(109,548)		(123,318)
NON-CASH INVESTING AND FINANCING ACTIVITY:
Other		(3,197)		(60)
Accounts payable for purchase of property, plant and equipment	$	15,621	$	10,376
Net cash used in financing activities		(271,380)		(340,075)
Assets acquired by capital lease	$	835	$	—
NET CHANGE IN CASH AND CASH EQUIVALENTS		(21,954)		(12,802)
Market value of ARLP common units issued under deferred compensation plans before tax withholding requirements	$	6,142	$	8,149
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		44,525		38,678
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	22,571	$	25,876
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	13,679	$	20,194
Cash paid for income taxes	$	10	$	7
NON-CASH INVESTING AND FINANCING ACTIVITY:
Accounts payable for purchase of property, plant and equipment	$	12,414	$	4,669
Assets acquired by capital lease	$	—	$	37,089
Market value of ARLP common units issued under ARLP's Long-Term Incentive and Directors Deferred Compensation Plans before tax withholding requirements	$	8,149	$	3,642

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND PRESENTATION

Significant Relationships Referenced in Notes to Condensed Consolidated Financial Statements

References to "we," "us," "our" or "AHGP" mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

References to "AHGP Partnership" mean the business and operations of Alliance Holdings GP, L.P., the parent company, as well as its consolidated subsidiaries, including MGP II, LLC ("MGP II"), Alliance Resource Management GP, LLC and Alliance Resource Partners, L.P. and its consolidated subsidiaries.

References to "AGP" mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., also referred to as our general partner.

References to "ARLP Partnership" mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

References to "ARLP" mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

· References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's sole general partner and, prior to the Exchange ~~Transactions~~Transaction discussed below, its managing general partner.

References to "SGP" mean Alliance Resource GP, LLC, ARLP's special general partner prior to the Exchange Transaction discussed below.

References to "Intermediate Partnership" mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

References to "Alliance Resource Properties" mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

References to "Alliance Coal" mean Alliance Coal, LLC, the holding company for the mining operations of Alliance Resource Operating Partners, L.P.

Organization ~~and Formation~~

We are a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "AHGP." We own directly and indirectly 100% of the members' interest in MGP, ARLP's sole general partner. The ARLP Partnership is a diversified producer and marketer of coal to major United States ("U.S.") utilities and industrial users. ARLP conducts substantially all of its business through its wholly- owned subsidiary, the Intermediate Partnership. Through our ownership of MGP, we own the 1.0001% managing general partner interest in the Intermediate Partnership. ARLP and the Intermediate Partnership were formed in May 1999, to acquire upon completion of ARLP's initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc. ("ARH"), a Delaware corporation. ARH is owned by Joseph W. Craft III, the Chairman, President and Chief Executive Officer of AGP as well as the President and Chief Executive Officer and a Director of MGP, and Kathleen S. Craft. SGP, a Delaware limited liability company, is owned by ARH. SGP owns 20,641,168 common units of AHGP's outstanding 59,863,000 units, 7,181 common units of ARLP and prior to the Exchange Transaction discussed below, owned a 0.01% special general partner interest in both ARLP and the Intermediate Partnership.

We are owned 100% by limited partners. Our general partner, AGP, has a non-economic interest in us and is owned by Mr. Craft.

Exchange Transaction

OnIn 2017, the board of directors of our general partner unanimously approved a transaction to simplify our partnership structure and on July 28, 2017, our wholly- owned subsidiary, MGP contributed to ARLP all of its incentive distribution rights ("IDRs") and its 0.99% managing general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP. In conjunction with this transaction and on the same ~~economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interests in both ARLP and the Intermediate Partnership in~~

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economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interests in both ARLP and the Intermediate Partnership in exchange for 7,181 ARLP common units (collectively the "Exchange Transaction"). In connection with the Exchange Transaction, ARLP amended its partnership agreement to reflect, among other things, cancellation of the IDRs and the economic general partner interest in ARLP and issuance of a non-economic general partner interest to MGP. MGP is the sole general partner of ARLP following the Exchange Transaction, and no control, management or governance changes otherwise occurred. We now own directly and indirectly 87,188,338 ARLP common units and a non-economic general partner interest in ARLP. We continue to own, through MGP, a 1.0001% managing general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal.

~~The~~Simultaneously with the Exchange Transaction ~~constituted~~discussed anabove, ~~exchange~~MGP ofbecame ~~equity~~a ~~interests~~wholly ~~between~~owned ~~entities~~subsidiary ~~under~~of ~~common~~MGP ~~control~~II, ~~and~~LLC ~~not~~("MGP aII"), ~~transfer~~which ofis adirectly ~~business. As~~and ~~there~~indirectly ~~was~~100% noowned ~~change~~by inus ~~control~~and ofwas ~~either~~created usin orconnection ~~ARLP,~~with the ~~exchange~~Exchange ~~reflects~~Transaction. As ~~the~~of ~~impact~~March on31, ~~controlling~~2018, ~~and~~MGP ~~noncontrolling~~II ~~interest~~held ~~at carrying value on a prospective basis from~~ the ~~date~~56,100,000 ofARLP ~~the~~common ~~Exchange~~units ~~Transaction~~discussed above.

Simultaneously with the Exchange Transaction discussed above, MGP became a wholly-owned subsidiary of MGP II, which is 100% owned directly and indirectly by us and was created in connection with the Exchange Transaction. MGP II holds the 56,100,000 ARLP common units discussed above.

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and operations and those of MGP, MGP II, ARLP (a variable interest entity of which AHGP is the primary beneficiary), ARLP's consolidated Intermediate Partnership and the Intermediate Partnership's operating subsidiaries and present the financial position as of ~~September 30~~March 31, ~~2017~~2018 and December 31, ~~2016~~2017, the results of operations, ~~and~~ comprehensive income ~~for the three~~ and ~~nine months ended September 30, 2017 and 2016, and~~ cash flows for the ~~nine~~three months ended ~~September~~March 3031, 2018 ~~2017~~ and ~~2016~~2017. ARLP and its consolidated subsidiaries represent virtually all the net assets and operations of AHGP. All intercompany transactions and accounts have been eliminated. See Note 8 – Variable Interest Entities for information regarding our consolidation of ARLP.

The earnings of the ARLP Partnership allocated to its limited partners' interests not owned by us are reflected as a noncontrolling interest in our condensed consolidated statements of income and balance sheet. Our consolidated financial statements do not differ materially from those of the ARLP Partnership. The differences between our financial statements and those of the ARLP Partnership are primarily attributable to (a) amounts reported as noncontrolling interests and (b) additional general and administrative costs and taxes attributable to us. The additional general and administrative costs principally consist of costs incurred by us as a result of being a publicly traded partnership, amounts billed by, and reimbursed to, Alliance Coal under an administrative services agreement and amounts billed by, and reimbursed to, AGP under our partnership agreement. Net income attributable to Alliance Holdings GP, L.P. from within our accompanying condensed consolidated financial statements will be described as "Net Income of AHGP."

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the periods presented. ~~Results~~ presented for prior periods have been recast to reflect an immaterial reclassification of depreciation, depletion, and amortization capitalized into coal inventory as an adjustment to Depreciation, depletion, and amortization rather than Operating expenses (excluding depreciation, depletion and amortization). This reclassification did not impact Total operating expenses, Income from operations, Net income, Net income of AHGP or Basic and diluted net income of AHGP per limited partner unit. Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, ~~2017~~2018.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the U.S. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017.

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Use of Estimates

The preparation of AHGP Partnership's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in our condensed consolidated financial statements. Actual results could differ from those estimates.

Investments

The ARLP Partnership's investments and ownership interests in ~~which~~equity itsecurities ~~does~~without ~~not~~readily ~~have~~determinable afair ~~controlling~~values ~~financial~~in ~~interest~~entities ~~are~~in which ~~accounted~~it ~~for either under the cost method of accounting if the ARLP Partnership~~ does not have ~~the~~a ~~ability~~controlling tofinancial ~~exercise~~interest ~~significant influence over the entity,~~ or ~~under the equity method of accounting if the ARLP Partnership has the ability to exercise~~ significant influence ~~over~~are ~~the~~accounted ~~entity.~~ for

Historical cost is used to account for investments accounted for under the cost method and distributions received on those investments are recorded as income unless those distributions are considered a return on investment in which case the historical cost is reduced. The ARLP Partnership's cost method investment includes Kodiak Gas Services, LLC ("Kodiak"). See Note 9 – Investments for further discussion of this cost method investment.6

~~Investments~~Table ~~accounted for under the equity method are initially recorded at cost, and the difference between the basis~~ of the ARLP Partnership's investment and the underlying equity in the net assets of the joint venture at the investment date, if any, is amortized over the lives of the related assets that gave rise to the difference. In the event the ARLP Partnership's ownership entitles it to a disproportionate sharing of income or loss, the ARLP Partnership's equity in income or losses of affiliates is allocated based on the hypothetical liquidation at book value ("HLBV") method of accounting. Contents

~~Under~~using ~~the~~a ~~HLBV~~measurement ~~method,~~alternative ~~equity~~other inthan ~~income~~fair orvalue ~~losses~~which ~~of affiliates~~ is ~~allocated~~historical ~~based~~cost onminus ~~the~~impairment, ~~difference~~if ~~between~~any, ~~the~~plus ~~ARLP~~or ~~Partnership's~~minus ~~claim~~changes onresulting ~~the~~from ~~net~~observable ~~assets~~price ofchanges ~~the~~in ~~equity~~orderly ~~method~~transactions ~~investee~~for atidentical ~~the~~or ~~end~~similar ~~and~~investments ~~beginning~~ of the ~~period,~~same ~~with~~entity. Distributions ~~consideration~~received ofon ~~certain~~those ~~eliminating~~investments ~~entries~~are ~~regarding~~recorded ~~differences~~as ofincome ~~accounting~~unless ~~for~~those ~~various related-party transactions, after taking into account contributions and~~ distributions, ifare ~~any. The~~considered ~~ARLP~~a ~~Partnership's~~return ~~share~~on ofinvestment ~~the~~in ~~net~~which ~~assets~~case of the ~~equity~~historical ~~method~~cost ~~investee~~ is ~~calculated~~reduced. The asARLP ~~the~~Partnership ~~amount~~accounts itfor ~~would receive if the equity method investee were to liquidate all of~~ its ~~assets~~ownership atinterests ~~net~~in ~~book~~Kodiak ~~value~~Gas ~~and distribute the resulting cash to creditors~~Services, ~~other~~LLC ~~investors~~("Kodiak") ~~and~~as ~~the~~equity ~~ARLP~~securities ~~Partnership~~without ~~according~~readily todeterminable ~~the~~fair ~~respective priorities~~values. ~~None~~ See ofNote ~~our~~9 ~~current~~– ~~equity~~Investments ~~investments~~for ~~use~~further ~~the~~discussion ~~HLBV method. Our last use~~ of this ~~method was in 2015 which will be discussed in our upcoming Form 10-K~~investment.

The ARLP Partnership's ~~equity method~~ investments ~~include~~and ~~AllDale~~ownership ~~Minerals,~~interests LPin ~~("AllDale~~entities ~~I"),~~in ~~and~~which ~~AllDale~~it ~~Minerals~~does ~~II,~~not LPhave ~~("AllDale~~a ~~II")~~controlling ~~(collectively~~financial ~~"AllDale~~interest ~~Minerals"),~~are ~~both~~accounted ~~held~~for byunder the ~~ARLP~~equity ~~Partnership's~~method ~~subsidiary~~of ~~Cavalier~~accounting ~~Minerals~~if ~~JV,~~it ~~LLC~~has ~~("Cavalier~~the ~~Minerals")~~ability to exercise significant influence over the entity. ~~The~~Investments ~~ARLP~~accounted ~~Partnership~~for ~~also~~under ~~has~~the an equity method ~~investment~~are ininitially ~~AllDale~~recorded ~~Minerals~~at ~~III~~cost, LPand ~~("AllDale~~the ~~III")~~difference ~~which~~between isthe ~~not~~basis ~~held~~of ~~through~~our ~~Cavalier~~investment ~~Minerals~~and ~~but~~the ~~rather~~underlying ~~held~~equity ~~directly~~in bythe net assets of the ~~ARLP~~joint ~~Partnership. See~~venture ~~Note~~at 9the –investment ~~Investments~~date, ~~for~~if ~~further~~any, ~~discussion~~is amortized over the lives of ~~these~~the ~~equity~~related ~~method~~assets ~~investments~~that gave rise to the difference.

The ARLP Partnership's ~~reviews~~equity ~~its~~method investments include AllDale Minerals, LP ("AllDale I"), and ~~ownership~~AllDale ~~interests~~Minerals ~~accounted~~II, ~~for~~LP ~~under~~("AllDale ~~both~~II") ~~the~~(collectively ~~equity~~"AllDale ~~method~~Minerals"), ofboth ~~accounting~~held ~~and~~by the ~~cost~~ARLP ~~method~~Partnership's ofaffiliate ~~accounting~~Cavalier ~~for~~Minerals ~~impairment~~JV, ~~whenever~~LLC ~~events~~("Cavalier orMinerals"), ~~changes~~and in ~~circumstances~~AllDale ~~indicate~~Minerals aIII, ~~loss~~LP in("AllDale III") which is held through the ~~value~~ARLP ofPartnership's subsidiary, Alliance Minerals. AllDale III and AllDale Minerals are collectively referred to as the ~~investment~~"AllDale ~~may~~Partnerships." See beNote ~~other-than-temporary~~9 – Investments for further discussion of these investments.

~~2. NEW~~The ~~ACCOUNTING~~ARLP ~~STANDARDS~~Partnership reviews its equity securities and its equity method investments for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other-than-temporary.

~~New~~Revenue ~~Accounting Standards Issued and Adopted~~Recognition

InRevenues ~~January~~from ~~2017,~~coal supply contracts with customers are recognized at the ~~Financial~~point ~~Accounting~~in ~~Standards~~time ~~Board~~when (control of the ~~"FASB")~~coal ~~issued~~passes ~~Accounting~~to ~~Standards~~the ~~Update~~customer. The ~~("ASU")~~ARLP ~~2017-04,~~Partnership ~~Intangibles–Goodwill~~has ~~and~~determined ~~Other~~that ~~(Topic~~each ~~350):~~ton ~~Simplifying~~of ~~the~~coal ~~Test~~represents ~~for~~a ~~Goodwill~~separate ~~Impairment~~and ~~("ASU~~distinct ~~2017-04")~~performance obligation. The ~~ASU~~ARLP ~~simplifies~~Partnership's ~~the~~coal ~~subsequent~~supply ~~measurement~~contracts ofand ~~goodwill~~other bysales ~~eliminating~~and ~~the~~operating ~~need~~revenue ~~for~~contracts anvary ~~entity~~in tolength ~~determine~~from ~~the~~short-term ~~implied~~to ~~fair~~long-term ~~value~~contracts ofand ~~goodwill~~do tonot ~~calculate~~typically anhave ~~impairment~~significant ~~charge~~financing components. ~~Under~~Transportation ~~the~~revenues ~~new~~represent ~~guidance~~the anfulfillment ~~entity~~costs ~~compares~~incurred for the ~~fair~~services ~~value~~provided ofto ~~the~~customers ~~reporting~~through ~~unit~~third-party ~~containing~~carriers and for which the ~~goodwill~~ARLP toPartnership is directly reimbursed. Other sales and operating revenues primarily consist of transloading fees, administrative service revenues from its ~~carrying~~affiliates, ~~value~~mine safety services and ~~records~~products, ~~any~~other ~~excess~~coal ~~carrying~~contract ~~value~~fees asand another ~~impairment~~handling ~~charge~~and service fees. ~~This~~ Performance ~~new~~obligations ~~standard~~under isthese ~~applied~~contracts ~~prospectively~~are ~~and~~typically satisfied upon transfer of control of the goods or services to the customer which is ~~effective~~determined ~~for~~by ~~annual~~the contract and ~~interim~~could ~~periods~~be ~~beginning~~upon shipment or upon delivery.

The estimated transaction price from each of the ARLP Partnership's contracts is based on the total amount of consideration the ARLP Partnership expects to be entitled to under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, government imposition claims, per ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The ARLP Partnership has constrained the expected value of variable consideration in its estimation of transaction price and only included this consideration to the extent that it is probable that a significant revenue reversal will not occur. The estimated transaction price for each contract is allocated to its performance obligations based on relative standalone selling prices determined at contract inception. Variable consideration is allocated to a specific part of the contract in many instances, such as if the variable consideration is based on production activities for coal delivered during a certain period or the outcome of a customer's ability to accept coal shipments over a certain period.

Contract assets are recorded as trade receivables and reported separately in the ARLP Partnership's consolidated balance sheet from other contract assets as title passes to the customer and its right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks of performance. The ARLP Partnership typically does not have material contract assets that are stated separately from trade receivables as its performance obligations are satisfied as control of the goods or services passes to the customer thereby granting the ARLP Partnership an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the ARLP Partnership's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good or service passes to the customer.

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~~after December 15, 2019; however, early adoption is permitted~~ 2. We NEW ~~have~~ACCOUNTING ~~early adopted this new standard and will apply the guidance to any future goodwill impairment assessments.~~STANDARDS

InNew ~~March 2016, the FASB issued ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment~~ Accounting ~~("ASU~~Standards ~~2016-09"). ASU~~Issued 2016-09 simplifies the accounting for several aspects of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, flexibility in the accounting for forfeitures and classification on the statement of cash flows. ASU 2016-09 was effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The adoption of ASU 2016-09 did not have a material impact on our condensed consolidated financial statements.Adopted

In ~~July~~March ~~2015~~2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update "(ASU") ~~2015~~2017-1107, ~~Inventory~~Compensation–Retirement Benefits (Topic ~~330~~715): ~~Simplifying the Measurement of Inventory~~ ("ASU ~~2015~~2017-1107"). ASU ~~2015~~2017-1107 ~~simplifies~~requires ~~the~~that ~~subsequent~~an ~~measurement~~employer ofdisaggregate ~~inventory. It~~the ~~replaces~~service cost component from the ~~current~~other ~~lower~~components of ~~cost~~net orbenefit ~~market~~cost. It ~~test~~also ~~with~~provides ~~the~~explicit ~~lower~~guidance ofon ~~cost~~how orto ~~net~~present ~~realizable~~the ~~value~~service ~~test. Net~~cost ~~realizable~~component ~~value~~and isthe ~~defined~~other ascomponents ~~the~~of ~~estimated~~net ~~selling~~benefit ~~prices~~cost in the ~~ordinary~~income ~~course~~statement ofand ~~business,~~allows ~~less~~only ~~reasonably~~the ~~predictable~~service ~~costs~~cost component of ~~completion,~~net ~~disposal,~~benefit ~~and~~cost ~~transportation. The~~to ~~new~~be ~~standard~~eligible ~~was~~for ~~applied~~capitalization. ASU ~~prospectively~~2017-07 ~~and~~is ~~was~~ effective for annual ~~reporting~~ periods beginning after December 15, ~~2016~~2017, ~~and~~including interim periods within those annual periods~~, with early adoption permitted~~. The adoption of ASU ~~2015~~2017-1107 did not have a material impact on our condensed consolidated financial statements. The new presentation requirements in the guidance were applied retrospectively to all periods presented using the amounts of other components of net benefit cost previously disclosed in prior period footnotes. The requirement under the guidance to only capitalize the service cost component was applied prospectively.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 will require entities to measure equity investments at fair value and recognize any changes in fair value in net income. The guidance removes the cost method of accounting for equity investments without a readily determinable fair value but provides a new measurement alternative where entities may choose to measure those investments at cost, less any impairment, plus or minus any changes resulting from observable price changes in transactions for the same issuer. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-01 did not have a material impact on our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 is a new revenue recognition standard that provides a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The adoption of the new standard did not have a material impact on our condensed consolidated financial statements, but requires expanded disclosures including presenting, by type and by segment, revenues for all periods presented and expected revenues by year for performance obligations that are unsatisfied or partially unsatisfied as of the date of presentation. The new standard allows for two methods of adoption: a full retrospective adoption method and a modified retrospective method. We elected to use the modified retrospective method of adoption which allows a cumulative effect adjustment to equity as of the date of adoption. As there was no change in the recognition pattern of our revenues, we did not have a cumulative effect adjustment upon adoption of the new standard. See Note 10 – Revenue from Contracts with Customers for additional information.

New Accounting Standards Issued and Not Yet Adopted

In ~~March~~June ~~2017~~2016, the FASB issued ASU ~~2017~~2016-0713, ~~Compensation~~Financial Instruments–~~Retirement~~Credit ~~Benefits~~Losses (Topic ~~715~~326): Measurement of Credit Losses on Financial Instruments ("ASU ~~2017~~2016-0713"). ASU ~~2017~~2016-0713 ~~requires~~changes ~~that~~the animpairment ~~employer~~model ~~disaggregate~~for ~~the~~most ~~service~~financial ~~cost~~assets ~~component~~and ~~from~~certain ~~the~~ other ~~components~~instruments ofto ~~net~~require ~~benefit~~the ~~cost. It~~use ~~also~~of ~~provides~~a ~~explicit~~new ~~guidance~~forward-looking on"expected ~~how~~loss" tomodel ~~present~~that ~~the~~generally ~~service~~will ~~cost~~result ~~component~~in ~~and~~earlier ~~the~~recognition ~~other~~of ~~components~~allowances offor ~~net~~losses. The ~~benefit~~new ~~cost~~standard inwill ~~the~~require ~~income~~disclosure ~~statement~~of ~~and~~significantly ~~allows~~more ~~only~~information ~~the~~related ~~service~~to ~~cost~~these ~~component~~items. ASU of2016-13 ~~net~~is ~~benefit~~effective ~~cost~~for tofiscal beyears ~~eligible~~beginning ~~for~~after ~~capitalization. The~~December ~~new~~15, ~~guidance~~2019, ~~will~~and beinterim ~~applied~~periods ~~retroactively~~within tothose ~~all~~fiscal ~~periods~~years, ~~presented. ASU~~with ~~2017-07~~early isadoption ~~effective~~permitted for ~~annual~~the ~~periods~~fiscal year beginning after December 15, ~~2017~~2018, including interim periods. We ~~within~~are ~~those~~currently ~~annual~~evaluating ~~periods. We~~the doeffect ~~not~~of ~~anticipate~~adopting ASU ~~2017~~2016-0713, but do not anticipate it will have a material impact on our condensed consolidated financial statements.

In ~~June~~February 2016, the FASB issued ASU 2016-1302, ~~Financial~~Leases ~~Instruments–Credit Losses~~ (Topic ~~326~~842): ~~Measurement of Credit Losses on Financial Instruments~~ ("ASU 2016-1302"). ASU 2016-1302 ~~changes~~increases ~~the~~transparency ~~impairment~~and ~~model~~comparability ~~for~~among ~~most~~organizations ~~financial~~by ~~assets~~requiring ~~and~~lessees ~~certain other instruments~~ to ~~require~~record ~~the~~ right-to-use ofassets aand ~~new~~corresponding ~~forward-looking~~lease ~~"expected~~liabilities ~~loss"~~on ~~model~~the ~~that~~balance ~~generally~~sheet ~~will~~and ~~result~~disclosing inkey ~~earlier~~information ~~recognition~~about oflease ~~allowances for losses~~arrangements. The new ~~standard~~guidance will ~~require~~classify ~~disclosure~~leases ofas ~~significantly~~either ~~more~~finance ~~information~~or ~~related~~operating (similar to ~~these~~current ~~items. ASU~~standard's ~~2016-13~~"capital" isor ~~effective~~"operating" ~~for~~classification), ~~fiscal~~with ~~years~~classification ~~beginning~~affecting ~~after~~the ~~December~~pattern ~~15,~~of ~~2019,~~income ~~and~~recognition ~~interim~~in ~~periods~~the ~~within~~statement ~~those~~of ~~fiscal~~income. ASU ~~years,~~2016-02 ~~with~~is ~~early~~effective ~~adoption permitted~~ for ~~the~~ fiscal ~~year~~years beginning after December 15, 2018, including interim periods~~. We~~ ~~are~~within ~~currently~~those ~~evaluating~~fiscal ~~the effect of adopting ASU 2016-13~~years, ~~but~~with doearly ~~not~~adoption ~~anticipate it will have a material impact on our consolidated financial statements.~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 increases transparency and comparability among organizations by requiring lessees to record right-to-use assets and corresponding lease liabilities on the balance sheet and disclosing key information about lease arrangements. The new guidance will classify leases as either finance or operating (similar to current standard's "capital" or "operating" classification), with classification affecting the pattern of income recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We have developed an assessment team and are currently evaluating the effect of adopting ASU 2016-02.

An entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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~~ASU~~permitted. The ~~2014-09~~FASB ~~was~~continues ~~originally~~to ~~effective~~issue ~~for fiscal years~~clarifications, updates and ~~interim~~implementation ~~periods~~guidance ~~within~~to ~~those~~ASU ~~years,~~2016-02 ~~beginning~~which ~~after~~we ~~December~~continue 15to monitor, ~~2016. In~~such ~~August~~as ~~2015~~ASU 2018-01, ~~the~~Leases ~~FASB~~(Topic ~~issued~~842) ("ASU ~~2015~~2018-~~14,~~01") ~~Revenue~~which ~~from~~provides ~~Contracts~~a ~~with~~land ~~Customers:~~easement ~~Deferral~~practical ofexpedient ~~the~~for ~~Effective~~transition ~~Date~~to ~~("ASU~~Topic ~~2015-14"),~~842. ~~which~~This ~~deferred~~update ~~the~~allows ~~effective~~for ~~date~~companies bythat ~~one~~did ~~year~~not ~~while~~previously ~~providing~~recognize ~~the~~land ~~option~~easements as leases to ~~early~~continue ~~adopt~~this ~~the~~practice ~~standard~~for onexisting leases, but will still require the ~~original~~evaluation ~~effective~~of ~~date~~new lease arrangements, including land easements.

The ARLP Partnership has developed an assessment team to determine the effect of adopting ASU ~~2014~~2016-0902. As part of the assessment process, ~~the~~management ~~ARLP~~has ~~Partnership~~provided ~~applied~~education ~~the~~and ~~five-step~~guidance ~~analysis outlined in the new standard~~ to ~~certain~~business ~~contracts~~units ~~representative~~regarding of the ~~majority of its coal sales contracts and determined that its pattern of recognition appears consistent between both the~~ new ~~and existing standards~~standard. The ARLP Partnership has also ~~reviewed~~started ~~the~~compiling ~~expanded~~and ~~disclosure~~reviewing ~~requirements~~its ~~under~~population ~~the~~of ~~new~~leases ~~standard~~ and ~~determined~~assessing ~~the additional information to be disclosed. In addition the ARLP Partnership reviewed~~ its ~~business processes,~~ systems and internal controls ~~over~~relating ~~financial reporting~~ to ~~support~~its ~~the~~accounting ~~new~~for ~~recognition and disclosure requirements under the new standard~~leases. ~~Based~~ In onaddition ~~the~~to ~~results~~monitoring ofFASB ~~the~~activity ~~ARLP~~regarding ~~Partnership's~~ASU ~~assessment team~~2016-02, the ARLP Partnership ~~has~~is ~~started~~continuing ~~its~~to ~~implementation~~monitor ofvarious ~~the~~non-authoritative ~~new~~groups ~~standard. The~~with ~~ARLP~~respect ~~Partnership continues~~ to ~~report its~~ implementation ~~progress~~issues ~~for~~that ~~the~~could ~~new~~affect ~~standard to~~ its ~~management and MGP's audit committee~~assessment.

The ARLP Partnership continues to monitor closely (a) activities of the FASB and various non-authoritative groups with respect to implementation issues that may impact its determinations, (b) existing contracts for consistency with current implementation determinations derived from it assessment process and (c) its revenue recognition policy, where applicable, for required modifications.

We do not expect that the adoption of the new standard will have a material impact on our financial statements, but will require expanded disclosures including presenting, by type and by segment, revenues for all periods presented and expected revenues by year for performance obligations that are unsatisfied or partially unsatisfied as of the date of presentation. The new standard allows for two methods of adoption: a full retrospective adoption method and a modified retrospective method. We have elected to use the modified retrospective method of adoption which allows a cumulative effect adjustment to equity as of the date of adoption. As we do not anticipate a change in the recognition pattern of our revenues, we do not expect to have a cumulative effect adjustment when we adopt the new standard.

3. CONTINGENCIES

WeOn ~~are~~March ~~not~~9, ~~engaged~~2018, inthe ~~any material litigation. The~~ ARLP Partnership isfinalized ~~involved~~an inagreement ~~various~~with ~~lawsuits,~~a ~~claims~~customer and ~~regulatory~~certain ~~proceedings~~of ~~incidental~~its affiliates to ~~its~~settle ~~business. The~~breach of contract litigation initiated by the ARLP Partnership ~~records~~in ~~accruals~~January 2015. The agreement provided for ~~potential~~a ~~losses~~$93.0 ~~related~~million cash payment to ~~these~~the ~~matters~~ARLP ~~when~~Partnership, inexecution ~~management's~~of ~~opinion,~~a ~~such~~new ~~losses~~coal ~~are~~supply ~~probable~~agreement ~~and~~with ~~reasonably~~the ~~estimable. Based~~customer, oncontinued ~~known~~export ~~facts~~transloading ~~and~~capacity ~~circumstances,~~for ~~the~~our ~~ARLP~~Appalachian ~~Partnership~~mines ~~believes~~and the ~~ultimate~~rights ~~outcome~~to ofacquire ~~these~~certain ~~outstanding~~coal ~~lawsuits,~~reserves ~~claims~~for ~~and~~$2.0 ~~regulatory~~million ~~proceedings~~from ~~will~~an ~~not~~affiliate ~~have~~of athe ~~material~~customer. We ~~adverse~~estimated ~~effect~~total onconsideration ~~its~~received ~~financial~~in ~~condition,~~the ~~results~~agreement ofto ~~operations~~be ora ~~liquidity~~$93. ~~However,~~0 ifmillion ~~the~~cash ~~results~~payment. The ARLP Partnership accrued $13.0 million of ~~these~~legal ~~matters~~fees ~~were~~and ~~different~~associated ~~from~~incentive ~~management's~~compensation ~~current~~costs ~~opinion~~related ~~and~~to this settlement which resulted in ~~amounts~~a ~~greater~~net ~~than~~gain of $80.0 million reflected in the ~~ARLP~~Settlement ~~Partnership's~~gain ~~accruals,~~line ~~then~~item ~~they~~in ~~could~~our ~~have~~condensed aconsolidated ~~material~~statements ~~adverse~~of ~~effect~~income.

We are not engaged in any material litigation. Various lawsuits, claims and regulatory proceedings incidental to its business are pending against the ARLP Partnership. The ARLP Partnership records accruals for potential losses related to these matters when, in management's opinion, such losses are probable and reasonably estimable. Based on known facts and circumstances, the ARLP Partnership believes the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on the ARLP Partnership's financial condition, results of operations or liquidity. However, if the results of these matters were different from management's current opinion and in amounts greater than the ARLP Partnership's accruals, then they could have a material adverse effect.

4. INVENTORIES

Inventories consist of the following:

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
	(in thousands)
Coal	$	5146,~~657~~784	$	2922,~~242~~825
Supplies (net of reserve for obsolescence of $5,015 and $4,940, respectively)		36,010		31,809
Supplies (net of reserve for obsolescence of $5,254 and $5,149, respectively)		37,160		37,450
Total inventories, net	$	8783,~~667~~944	$	6160,~~051~~275

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5. FAIR VALUE MEASUREMENTS

The following table summarizes our fair value measurements within the hierarchy:

September 30, 2017

December 31, 2016

March 31, 2018

December 31, 2017

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

(in thousands)

Measured on a recurring basis:

Contingent consideration

—

96,~~700~~800

—

96,~~700~~800

Additional disclosures:

Long-term debt

—

~~536~~480,~~296~~280

—

~~559~~541,~~509~~147

—

Total

—

~~536~~480,~~296~~280

96,~~700~~800

—

~~559~~541,~~509~~147

96,~~700~~800

The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued and other liabilities, due from affiliates and due to affiliates approximate fair value due to the short maturity of those instruments.

The estimated fair value of the ARLP Partnership's long-term debt, including current maturities, is based on interest rates that the ARLP Partnership believes are currently available to it in active markets for issuance of debt with similar terms and remaining maturities (See Note 6 – Long-Term Debt). The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

The estimated fair value of the ARLP Partnership's contingent consideration arrangement is based on a probability-weighted discounted cash flow model. The assumptions in the model include a risk-adjusted discount rate, forward coal sales price curves, cost of debt and probabilities of meeting certain contractual threshold coal sales prices. The fair value measurement is based on significant inputs not observable in active markets and thus represents a Level 3 fair value measurement under the fair value hierarchy.

6. LONG-TERM DEBT

Long-term debt consists of the following:

					Unamortized Discount and
	Principal				Debt Issuance Costs
	September 30,		December 31,		September 30,		December 31,
	March 31,		December 31,		March 31,		December 31,
	2017		2016		2017		2016
	2018		2017		2018		2017
	(in thousands)
ARLP Revolving Credit facility	$	—	$	~~255~~30,000	$	(76,~~615~~818)	$	(~~453~~7,356)
ARLP Senior notes		400,000		—400,000		(6,~~936~~479)		—(6,707)
ARLP Series B senior notes		—		145,000		—		(101)
ARLP Securitization facility		40,000		72,400		—		—
ARLP Term loan		—		50,000		—		(126)
		440,000		502,400		(13,297)		(14,063)
ARLP Securitization facility		100,000		100,000		—		—
Less current maturities		(40,000)		(72,400)		—		—
		500,000		550,000		(14,551)		(680)
Total long-term debt	$	400,000	$	430,000	$	(13,297)	$	(14,063)
Less current maturities		(100,000)		(150,000)		—		126
Total long-term debt	$	400,000	$	400,000	$	(14,551)	$	(554)

On January 27, 2017, the Intermediate Partnership entered into a Fourth Amended and Restated Credit Agreement (the "ARLP Credit Agreement") with various financial institutions. The ARLP Credit Agreement provides for a $494.75 million revolving credit facility, ~~and~~including ~~term~~a ~~loan~~sublimit (of $125 million for the ~~"ARLP~~issuance ~~Credit~~of ~~Facility"). The~~letters ~~ARLP~~of ~~Credit~~credit ~~Facility~~and ~~replaced~~a ~~the~~sublimit of $~~250~~15.0 million ~~term~~for ~~loan~~swingline borrowings (the "ARLP ~~Replaced~~Revolving ~~Term~~Credit ~~Loan~~Facility"), ~~and~~with ~~$700~~a ~~million~~termination ~~revolving~~date ~~credit~~of ~~facility~~May ~~("ARLP~~23, ~~Replaced~~2019. The ~~Revolving~~ARLP Credit ~~Facility")~~Agreement ~~extended~~was toamended ~~the~~on ~~Intermediate~~April ~~Partnership~~3, on2017 ~~May~~to ~~23,~~extend ~~2012~~the (termination date of the "ARLP ~~Replaced~~Revolving Credit ~~Agreement")~~Facility byas ~~various~~to ~~banks~~$461.25 ~~and~~million ~~other~~of ~~lenders~~the ~~that~~$494.75 ~~would~~million ~~have~~of ~~expired~~commitments onto May 23, ~~2017~~2021 and effectuate certain other changes.

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The ARLP Credit Agreement ~~provided~~is ~~for~~guaranteed aby ~~$776.5~~all ~~million revolving credit facility, reducing to $494.75 million on May 23, 2017, including a sublimit~~ of ~~$125 million for~~ the ~~issuance~~material ofdirect ~~letters of credit~~ and aindirect ~~sublimit~~subsidiaries of ~~$15.0 million for swingline borrowings (~~the ~~"ARLP~~Intermediate ~~Revolving Credit Facility")~~Partnership, and ~~for~~is asecured ~~term~~by ~~loan~~substantially ~~with~~all ~~a remaining principal balance~~ of ~~$50.0 million (~~the ~~"ARLP~~Intermediate ~~Term~~Partnership's ~~Loan")~~assets. ~~The~~Borrowings ~~outstanding revolver balance and term loan balance~~ under the ARLP ~~Replaced~~Revolving Credit ~~Agreement~~Facility ~~were~~bear ~~considered~~interest, ~~advanced~~at ~~under~~ the ~~ARLP~~option ~~Credit~~of ~~Facility~~the onIntermediate ~~January 27~~Partnership, ~~2017. On~~at ~~April~~either 3,(i) ~~2017,~~ the ~~ARLP~~Base ~~Partnership~~Rate ~~entered~~at ~~into~~the angreater ~~amendment~~of tothree ~~the~~benchmarks ~~ARLP~~or ~~Credit Agreement~~ (~~the "Amendment"~~ii) ~~to (~~a) ~~extend~~Eurodollar ~~the~~Rate, ~~termination~~plus ~~date~~margins offor ~~the~~(i) ~~ARLP~~or ~~Revolving~~(ii), ~~Credit Facility~~ as ~~to $461.25 million of commitments to May 23~~applicable, ~~2021,~~that ~~(b)~~fluctuate ~~eliminate~~depending upon the ~~Cavalier~~ratio ~~Condition~~of ~~and~~Consolidated ~~the~~Debt ~~ARLP~~to ~~Senior~~Consolidated ~~Notes~~Cash ~~Condition~~Flow (~~both~~each as defined in the ARLP Credit Agreement) ~~and (c) effectuate certain other changes~~. InThe ~~connection~~Eurodollar Rate, with ~~the~~applicable ~~Amendment~~margin, under the ~~ARLP~~Credit ~~Partnership~~Facility ~~increased~~was 4.07% ~~the~~as ~~commitments~~of ~~under~~March ~~the~~31, ~~ARLP~~2018. At ~~Revolving~~March ~~Credit~~31, ~~Facility~~2018, ~~from~~the ~~$479.75~~ARLP ~~million~~Partnership tohad $~~494~~8.751 million, ~~effective~~of ~~May~~letters ~~23,~~of ~~2017~~credit ~~(of~~outstanding ~~which~~with $33486.57 million ~~expire~~available onfor ~~May~~borrowing ~~23,~~under ~~2019)~~the ARLP Revolving Credit Facility. The ARLP Partnership ~~incurred~~currently ~~debt~~incurs ~~issuance~~an ~~costs~~annual incommitment ~~2017~~fee of $80.935% ~~million~~on inthe ~~connection~~undrawn ~~with~~portion of the ARLP Revolving Credit ~~Agreement~~Facility. ~~These~~The ~~debt~~ARLP ~~issuance~~Partnership ~~costs~~utilizes ~~are~~the ~~deferred~~ARLP ~~and~~Revolving ~~are~~Credit ~~being~~Facility, ~~amortized~~ as aappropriate, ~~component~~for ofworking ~~interest~~capital ~~expense~~requirements, ~~over~~capital ~~the~~expenditures ~~term~~and ofinvestments, ~~the~~scheduled ~~ARLP~~debt ~~Credit~~payments ~~Facility~~and distribution payments.

The ARLP Credit Agreement iscontains ~~guaranteed~~various byrestrictions ~~all~~affecting of the ~~material~~Intermediate ~~direct~~Partnership and ~~indirect~~its subsidiaries including, among other things, restrictions on incurrence of ~~the~~additional ~~Intermediate~~indebtedness ~~Partnership~~and liens, sale of assets, investments, mergers and isconsolidations ~~secured~~and transactions with affiliates, in each case subject to various exceptions, and the payment of cash distributions by ~~substantially~~the ~~all~~Intermediate Partnership if such payment would result in a certain fixed charge coverage ratio (as defined in the ARLP Credit Agreement). See Note 8 – Variable Interest Entities for further discussion of restrictions on the cash available for distribution. The ARLP Credit Agreement requires the Intermediate Partnership’s ~~assets~~maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0 and (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters. The ~~$50~~debt to cash flow ratio and cash flow to interest expense ratio were 0.75 to 1.0 ~~million~~and ~~principal~~16.0 ~~balance~~to of1.0, respectively, for the ~~ARLP~~ ~~Term~~trailing ~~Loan~~twelve ~~was~~months ~~paid~~ended inMarch ~~full~~31, 2018. The ARLP Partnership remains in ~~May~~compliance ~~2017~~with the covenants of the ARLP Credit Agreement as of March 31, 2018.

~~Borrowings~~On ~~under~~April 24, 2017, the ~~ARLP~~Intermediate ~~Credit~~Partnership ~~Facility~~and ~~bear~~Alliance ~~interest~~Resource Finance Corporation (as co-issuer), ata ~~the~~wholly ~~option~~owned subsidiary of the Intermediate Partnership, ~~at either~~ (i"Alliance Finance"), ~~the~~issued ~~Base~~an ~~Rate~~aggregate atprincipal ~~the~~amount ~~greater~~of $400.0 million of ~~three~~senior ~~benchmarks~~unsecured ornotes due 2025 (ii"ARLP Senior Notes") in a ~~Eurodollar~~private ~~Rate,~~placement ~~plus~~to ~~margins~~qualified ~~for~~institutional ~~(i)~~buyers. The orARLP ~~(ii),~~Senior asNotes ~~applicable,~~have ~~that~~a ~~fluctuate~~term ~~depending~~of ~~upon~~eight years maturing on May 1, 2025 (the ~~ratio~~"Term") ofand ~~Consolidated~~accrue ~~Debt~~interest toat ~~Consolidated~~an ~~Cash~~annual ~~Flow~~rate ~~(each~~of as7.5%. Interest ~~defined~~is payable semi-annually in ~~the~~arrears ~~ARLP~~on ~~Credit~~each ~~Agreement)~~May 1 and November 1. The indenture governing the ARLP ~~Partnership~~Senior ~~elected~~Notes acontains ~~Eurodollar~~customary ~~Rate~~terms, ~~which~~events of default and covenants relating to, ~~with~~among ~~applicable~~other ~~margin~~things, ~~was~~the ~~3.59%~~incurrence asof debt, the payment of ~~September~~distributions 30or similar restricted payments, ~~2017~~undertaking transactions with affiliates and limitations on asset sales. At ~~September~~any 30time prior to May 1, ~~2017~~2020, the issuers of the ARLP ~~Partnership~~Senior ~~had~~Notes ~~$8.1~~may ~~million~~redeem up to 35% of ~~letters~~the aggregate principal amount of ~~credit~~the ~~outstanding~~ARLP Senior Notes with ~~$486.7~~the ~~million~~net ~~available~~cash ~~for~~proceeds ~~borrowing~~of ~~under~~one ~~the~~or ~~ARLP~~more ~~Revolving~~equity ~~Credit~~offerings ~~Facility~~at a redemption price equal to 107.5% of the principal amount redeemed, plus accrued and unpaid interest, if any, to the redemption date. The issuers of the ARLP ~~Partnership~~Senior ~~currently~~Notes ~~incurs an annual~~may ~~commitment~~also ~~fee~~redeem all or a part of ~~0.35%~~the notes at any time on or after May 1, 2020, at redemption prices set forth in the ~~undrawn~~indenture ~~portion~~governing the ARLP Senior Notes. At any time prior to May 1, 2020, the issuers of the ARLP ~~Revolving~~Senior ~~Credit~~Notes ~~Facility. The~~may redeem the ARLP ~~Partnership~~Senior ~~utilizes~~Notes at a redemption price equal to the ~~ARLP~~principal ~~Revolving~~amount ~~Credit~~of ~~Facility,~~the asARLP ~~appropriate,~~Senior ~~for~~Notes ~~working~~plus ~~capital~~a ~~requirements~~"make-whole" premium, ~~capital~~plus ~~expenditures~~accrued and ~~investments~~unpaid ~~in affiliates~~interest, ~~scheduled~~if ~~debt~~any, ~~payments~~to ~~and~~the ~~distribution~~redemption ~~payments~~date.

~~The~~On ~~ARLP~~December ~~Credit Agreement contains various restrictions affecting the Intermediate Partnership and its subsidiaries including~~5, ~~among other things~~2014, ~~incurrence~~certain ofdirect ~~additional indebtedness~~ and ~~liens,~~indirect ~~sale~~wholly ofowned ~~assets,~~subsidiaries ~~investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions, and the payment~~ of ~~cash distributions by~~ the Intermediate Partnership ifentered ~~such~~into ~~payment would result in~~ a ~~certain~~$100.0 ~~fixed~~million ~~charge~~accounts ~~coverage~~receivable ~~ratio~~securitization ~~(as~~facility ~~defined in the~~ ("ARLP ~~Credit Agreement~~Securitization Facility"). ~~The~~Under ~~Amendment~~the ~~lowered~~ARLP ~~this~~Securitization ~~fixed~~Facility, ~~charge~~certain ~~ratio~~subsidiaries ~~from~~sell ~~less~~trade ~~than~~receivables ~~1.25~~on toan ~~1.0~~ongoing tobasis ~~1.15~~ to ~~1.0 for each rolling four-quarter period and further limited~~ the Intermediate Partnership’s, ~~ability~~which tothen ~~incur~~sells ~~certain unsecured debt. The Amendment raised~~ the ~~debt~~trade receivables to ~~cash~~AROP ~~flow~~Funding, ~~ratio~~LLC ~~from~~("AROP ~~2.25~~Funding"), toa ~~1.0~~wholly toowned ~~2.50~~bankruptcy-remote tospecial ~~1.0~~purpose ~~and~~subsidiary ~~also~~of ~~removed~~ the ~~requirement for the~~ Intermediate Partnership, towhich ~~remain~~ in ~~control~~turn ofborrows on a ~~certain~~revolving ~~amount~~basis ofup ~~mineable~~to ~~coal~~$100.0 ~~reserves~~million ~~relative~~secured toby ~~its~~the ~~annual~~trade ~~production~~receivables. ~~The~~After ~~ARLP Credit Agreement requires~~ the ~~Intermediate~~sale, ~~Partnership~~Alliance ~~maintain~~Coal, ~~(a)~~as aservicer ~~debt to cash flow ratio~~ of ~~not~~the ~~more~~assets, ~~than~~collects ~~2.5~~the toreceivables ~~1.0~~on ~~and~~behalf ~~(b) a cash flow to interest expense ratio~~ of ~~not~~AROP ~~less than 3~~Funding.0 The toARLP ~~1.0,~~Securitization inFacility ~~each~~bears ~~case,~~interest ~~during~~based ~~the~~on ~~four~~a ~~most~~Eurodollar ~~recently ended fiscal quarters~~Rate. ~~The~~It ~~debt~~was torenewed ~~cash~~in ~~flow~~January ~~ratio~~2018 and ~~cash~~matures ~~flow~~in toJanuary ~~interest expense ratio were 0~~2019.84 toAt ~~1.0~~March ~~and 19.2 to 1.0~~31, ~~respectively~~2018, ~~for~~ the ~~trailing~~ARLP ~~twelve~~Partnership ~~months~~had ~~ended September 30, 2017~~$40. ~~The~~0 ~~ARLP~~million ~~Partnership was compliant~~outstanding ~~with~~under the ~~covenants~~Securitization ~~of the ARLP Credit Agreement as of September 30, 2017~~Facility.

On ~~January~~October 276, ~~2017~~2015, ~~the~~Cavalier ~~Intermediate~~Minerals ~~Partnership~~(see ~~also~~Note ~~amended~~8 ~~the~~– ~~2008~~Variable ~~Note~~Interest ~~Purchase~~Entities) ~~Agreement~~entered ~~dated~~into ~~June~~a ~~26,~~credit ~~2008,~~agreement ~~for~~(the ~~$145.0~~"Cavalier ~~million~~Credit ofAgreement") ~~ARLP~~with ~~Series~~Mineral BLending, ~~Senior~~LLC ~~Notes~~("Mineral ~~which~~Lending") ~~bore~~for ~~interest~~a ~~at 6~~$100.~~72%~~0 ~~and~~million ~~were~~line ~~due~~of tocredit ~~mature on June 26, 2018 with interest payable semi-annually~~ (the "~~ARLP~~Cavalier ~~Series~~Credit ~~B Senior Notes~~Facility"). ~~The~~Mineral ~~amendment~~Lending ~~provided~~is ~~for~~an ~~certain~~entity ~~modifications~~owned toby ~~the~~(a) ~~terms~~Alliance ~~and~~Resource ~~provisions~~Holdings ofII, ~~the~~Inc. ~~Note~~("ARH ~~Purchase Agreement~~II," ~~including~~the ~~granting~~parent ~~liens on substantially all~~ of ~~the~~ARH), ~~Intermediate~~(b) ~~Partnership's~~an ~~assets~~entity toowned ~~secure~~by ~~its obligations under the Note Purchase Agreement on~~ an ~~equal~~officer ~~basis~~of ~~with~~ARH ~~the~~who ~~obligations~~is ~~under the ARLP Credit Agreement. The amendment~~ also ~~modified~~a ~~certain~~director ~~covenants~~of toARH ~~align~~II ~~them~~("ARH ~~with~~Officer") ~~the~~and ~~applicable~~(c) ~~covenants in the ARLP Credit Agreement. As discussed below, the ARLP Partnership repaid the ARLP Series B Senior Notes in May 2017.~~

On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $400.0 million of senior unsecured notes due 2025 ("ARLP Senior Notes") in a private placement to qualified institutional

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~~buyers. The~~foundations ~~ARLP~~established ~~Senior~~by ~~Notes have a term of eight years maturing on May 1, 2025 (~~the ~~"Term")~~President and ~~accrue~~Chief ~~interest~~Executive atOfficer anof ~~annual~~MGP ~~rate~~and ofKathleen 7S.5% Craft. ~~Interest~~There is ~~payable~~no ~~semi-annually~~commitment infee ~~arrears~~under onthe ~~each~~facility. Mineral ~~May~~Lending's 1obligation ~~and~~to ~~November~~make ~~1, commencing on November 1, 2017. The indenture governing~~ the ~~ARLP~~line ~~Senior~~of ~~Notes~~credit ~~contains~~available ~~customary~~terminates ~~terms,~~no ~~events~~later ofthan ~~default~~October ~~and covenants relating to~~6, ~~among~~2019. Borrowings ~~other~~under ~~things,~~ the ~~incurrence~~Cavalier ofCredit ~~debt,~~Facility ~~the~~bear ~~payment~~interest ofat ~~distributions~~a orone ~~similar~~month ~~restricted~~LIBOR ~~payments,~~rate ~~undertaking~~plus ~~transactions~~6% with ~~affiliates~~interest payable quarterly, and ~~limitations~~matures on ~~asset~~September ~~sales. At~~30, ~~any~~2024, ~~time~~at ~~prior~~which totime ~~May~~all 1,amounts ~~2020,~~then ~~the~~outstanding ~~issuers~~are ofrequired ~~the~~to ~~ARLP~~be ~~Senior~~repaid. ~~Notes~~The ~~may~~Cavalier ~~redeem~~Credit upAgreement torequires ~~35%~~repayment of the ~~aggregate~~ principal ~~amount~~balance ofbeginning ~~the~~in ~~ARLP~~2018, ~~Senior~~in ~~Notes~~quarterly ~~with~~payments ~~the net cash proceeds~~ of ~~one~~an oramount ~~more~~equal ~~equity~~to ~~offerings~~the atgreater aof ~~redemption~~$1.3 ~~price~~million ~~equal~~initially, escalated to ~~107~~$2.5% ofmillion ~~the~~after ~~principal~~two ~~amount redeemed~~years, ~~plus~~or ~~accrued~~fifty ~~and~~percent ~~unpaid~~of ~~interest,~~Cavalier ifMinerals' ~~any,~~excess tocash ~~the redemption date~~flow. ~~The~~ To ~~issuers~~secure payment of the ~~ARLP~~facility, ~~Senior~~Cavalier ~~Notes~~Minerals ~~may~~pledged ~~also redeem~~ all ~~or a part~~ of ~~the~~its ~~notes~~partnership atinterests, ~~any~~owned ~~time on~~ or ~~after~~later ~~May 1~~acquired, ~~2020, at redemption prices set forth~~ in ~~the~~AllDale ~~indenture governing the ARLP Senior Notes~~Minerals. AtCavalier ~~any~~Minerals ~~time prior to May 1, 2020, the issuers of the ARLP Senior Notes~~ may ~~redeem~~prepay the ~~ARLP~~Cavalier ~~Senior~~Credit ~~Notes~~Facility at aany ~~redemption~~time ~~price~~in ~~equal~~whole toor ~~the~~in ~~principal~~part ~~amount~~subject ofto ~~the~~terms ~~ARLP Senior Notes plus a "make-whole" premium, plus accrued~~ and ~~unpaid~~conditions ~~interest,~~described ifin ~~any, to~~ the ~~redemption~~Cavalier ~~date~~Credit Agreement. ~~The~~As ~~net~~of ~~proceeds~~March ~~from~~31, ~~issuance~~2018, ofCavalier ~~the~~Minerals ~~ARLP~~had ~~Senior~~not ~~Notes~~drawn ~~and cash~~ on ~~hand were used to repay~~ the ~~ARLP~~Cavalier ~~Revolving~~ Credit Facility~~, ARLP Term Loan and ARLP Series B Senior Notes (including a make-whole payment of $8~~.~~1 million).~~ ~~The~~Alliance ~~ARLP~~Minerals ~~Partnership~~has ~~incurred~~the ~~discount~~right ~~and~~to ~~debt~~require ~~issuance~~Cavalier ~~costs~~Minerals ofto ~~$7.3~~draw ~~million~~the infull ~~connection~~amount ~~with~~available ~~issuance~~under of the ~~ARLP~~Cavalier ~~Senior~~Credit ~~Notes. These~~Facility ~~costs are deferred~~ and ~~are~~distribute ~~currently~~the ~~being amortized~~proceeds asto athe ~~component~~members of ~~interest~~Cavalier ~~expense~~Minerals, ~~over~~including ~~the~~Alliance ~~Term~~Minerals.

On December 5, 2014, certain direct and indirect wholly-owned subsidiaries of the Intermediate Partnership entered into a $100.0 million accounts receivable securitization facility ("ARLP Securitization Facility"). Under the ARLP Securitization Facility, certain subsidiaries sell trade receivables on an ongoing basis to the Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC ("AROP Funding"), a wholly-owned bankruptcy-remote special purpose subsidiary of the Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables. After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding. The ARLP Securitization Facility bears interest based on a Eurodollar Rate. It was renewed in December 2016 and matures in December 2017. At September 30, 2017, the ARLP Partnership had $100.0 million outstanding under the Securitization Facility.

On October 6, 2015, Cavalier Minerals (see Note 8 – Variable Interest Entities) entered into a credit agreement (the "Cavalier Credit Agreement") with Mineral Lending, LLC ("Mineral Lending") for a $100.0 million line of credit (the "Cavalier Credit Facility"). Mineral Lending is an entity owned by (a) Alliance Resource Holdings II, Inc. ("ARH II," the parent of ARH), (b) an entity owned by an officer of ARH who is also a director of ARH II ("ARH Officer") and (c) foundations established by the President and Chief Executive Officer of MGP and Kathleen S. Craft. There is no commitment fee under the facility. Borrowings under the Cavalier Credit Facility bear interest at a one month LIBOR rate plus 6% with interest payable quarterly. Repayment of the principal balance will begin following the first fiscal quarter after the earlier of the date on which the aggregate amount borrowed exceeds $90.0 million or December 31, 2017, in quarterly payments of an amount equal to the greater of $1.3 million initially, escalated to $2.5 million after two years, or fifty percent of Cavalier Minerals' excess cash flow. The Cavalier Credit Facility matures September 30, 2024, at which time all amounts then outstanding are required to be repaid. To secure payment of the facility, Cavalier Minerals pledged all of its partnership interests, owned or later acquired, in AllDale Minerals. Cavalier Minerals may prepay the Cavalier Credit Facility at any time in whole or in part subject to terms and conditions described in the Cavalier Credit Agreement. As of September 30, 2017, Cavalier Minerals had not drawn on the Cavalier Credit Facility. Alliance Minerals, LLC ("Alliance Minerals") has the right to require Cavalier Minerals to draw the full amount available under the Cavalier Credit Facility and distribute the proceeds to the members of Cavalier Minerals, including Alliance Minerals.

7. NONCONTROLLING INTERESTS

Our noncontrolling ownership interest in consolidated subsidiaries is presented in the condensed consolidated balance sheet within partners' capital as a separate component from the limited partners' equity. In addition, consolidated net income includes earnings attributable to both the limited partners' and the noncontrolling interests.

The noncontrolling interests balance is comprised of non-affiliate and affiliate ownership interests in the net assets of the ARLP Partnership that we consolidate (See Note 1 – Organization and Presentation) and an affiliate ownership interest in Cavalier Minerals (See Note 8 – Variable Interest Entities).

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The following table summarizes the components of noncontrolling interests recorded in Partners' Capital for the periods indicated:

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
	(in thousands)
Noncontrolling interests reflected in Partners' Capital:
Affiliate (SGP)	$	(303,~~818~~813)	$	(303,~~818~~817)
Non-Affiliates (ARLP's non-affiliate limited partners)		~~871~~905,~~432~~726		~~836~~876,~~380~~451
Affiliate (Cavalier Minerals) (See Note 8 - Variable Interest Entities)		5,~~371~~334		5,~~550~~348
Accumulated other comprehensive loss attributable to noncontrolling interests		(1216,~~424~~836)		(2117,~~990~~120)
Total noncontrolling interests	$	~~560~~590,~~561~~411	$	~~516~~560,~~122~~862

The noncontrolling interest designated as Affiliate (SGP) represents SGP's limited partner interest in ARLP and, prior to the Exchange Transaction, SGP's 0.01% general partner interest in ARLP and 0.01% general partner interest in the Intermediate Partnership (See Note 1 – Organization and Presentation).

The noncontrolling interest designated as Non-Affiliates represents the limited partners' interest in ARLP controlled through the common unit ownership, excluding the 87,188,338 common units of ARLP held directly and indirectly by us (See Note 1 – Organization and Presentation). The total obligation associated with ARLP's Long-Term Incentive Plan ("ARLP LTIP"), MGP Amended and Restated Deferred Compensation Plan for Directors ("MGP Deferred Compensation Plan") and the Supplemental Executive Retirement Plan ("SERP") are also included in the Non-Affiliates component of noncontrolling interest (See Note 1112 – Compensation Plans).

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The following table summarizes net income attributable to each component of the noncontrolling interests for the periods indicated:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Net income attributable to noncontrolling interest:
Affiliate (SGP)	$	38	$	1417	$	23	$	32
Non-Affiliates (ARLP's non-affiliate limited partners)		2151,~~663~~603		4049,~~279~~386		~~91,213~~		~~92,571~~
Affiliates (Cavalier Minerals)		~~155~~148		44148		~~425~~		40
	$	2151,~~821~~759	$	4049,~~337~~551	$	~~91,661~~	$	~~92,643~~

The following table summarizes cash distributions paid by ARLP to each component of the noncontrolling interests for the periods indicated:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2017		2016
	2018		2017
	(in thousands)
Distributions paid to noncontrolling interests:
Affiliate (SGP) (1)	$	234	$	389
Non-Affiliates (ARLP's non-affiliate limited partners) (1)		6223,~~120~~253		6919,~~642~~801
	$	6223,~~143~~257	$	6919,~~680~~810

(1)

Distributions paid to noncontrolling interests, in the table above, represent ARLP's quarterly distributions in accordance with the ARLP partnership agreement.

The Affiliate (SGP) component of noncontrolling interests represents SGP's cumulative investment basis in the net assets of the ARLP Partnership. SGP's investment basis as of March 31, 2018 and December 31, 2017 reflects various transactions associated with the ARLP Partnership's formation and initial public offering in 1999, the cumulative amount of nominal ARLP Partnership income allocations and distributions to SGP, nominal contributions by SGP to ARLP and the Intermediate Partnership to maintain its previous general partner interests in the ARLP Partnership and nominal net income allocations related to SGP's new limited partner interests obtained in the recent Exchange Transaction (See Note 1 – Organization and Presentation).

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The ~~Affiliate~~following ~~(SGP)~~tables ~~component~~present ofthe ~~noncontrolling~~change ~~interests~~in ~~represents SGP~~Partners's ~~cumulative~~Capital ~~investment~~for ~~basis in~~ the ~~net~~three ~~assets~~months ofended ~~the~~March ~~ARLP Partnership. SGP's investment basis as of September 30, 2017 and December~~ 31, ~~2016~~ ~~reflects~~2018 ~~various transactions associated with the ARLP Partnership's formation~~ and initial public offering in 1999, the cumulative amount of nominal ARLP Partnership income allocations and distributions to SGP, nominal contributions by SGP to ARLP and the Intermediate Partnership to maintain its previous general partner interests in the ARLP Partnership and nominal net income allocations related to SGP's new limited partner interests obtained in the recent Exchange Transaction (See Note 1 – Organization and Presentation).2017:

The following tables present the change in Partners' Capital for the nine months ended September 30, 2017 and 2016:


	Alliance Holdings GP, L.P.
			Accumulated Other
	Limited Partners'		Comprehensive		Noncontrolling		Total Partners'
	Capital		Income (Loss)		Interest		Capital
	(in thousands)

Balance at January 1, 2018	$	626,831	$	(34,820)	$	560,862	$	1,152,873
Net income		103,720		—		51,759		155,479
Other comprehensive income		—		733		284		1,017
Settlement of directors deferred compensation		(119)		—		—		(119)
Vesting of ARLP Long-Term Incentive Plan		—		—		(2,081)		(2,081)
Simplification fees		(734)		—		—		(734)
Common unit-based compensation		(122)		—		3,006		2,884
Distributions on ARLP common unit-based compensation		—		—		(1,062)		(1,062)
Distributions to AHGP Partners		(44,449)		—		(22,195)		(66,644)
Distributions paid by consolidated partnership to noncontrolling interest		—		—		(162)		(162)
Balance at March 31, 2018	$	685,127	$	(34,087)	$	590,411	$	1,241,451

	Alliance Holdings GP, L.P.
			Accumulated Other
	Limited Partners'		Comprehensive		Noncontrolling		Total Partners'
	Capital		Income (Loss)		Interest		Capital
	(in thousands)
Balance at January 1, 2017	$	598,077	$	(16,550)	$	516,122	$	1,097,649
Net income		~~136~~55,~~716~~011		—		9149,~~661~~551		~~228~~104,~~377~~562
Other comprehensive income		—		~~468~~155		~~378~~98		~~846~~253
Other comprehensive income reclassification resulting from the Exchange Transaction		—		(9,188)		9,188		—
Settlement of directors deferred compensation		(14)		—		—		(14)
Settlement of directors deferred compensation		(26)		—		—		(26)
Vesting of ARLP Long-Term Incentive Plan		—		—		(2,988)		(2,988)
Exchange Transaction fees		(2,342)		—		—		(2,342)
Common unit-based compensation		(103)		—		2,884		2,781
Common unit-based compensation		(63)		—		8,947		8,884
Distributions on ARLP common unit-based compensation		—		—		(862)		(862)
Distributions on ARLP common unit-based compensation		—		—		(2,392)		(2,392)
Contributions to consolidated company from affiliate noncontrolling interest		—		—		251		251
Distributions paid by consolidated company		—		—		(~~855~~190)		(~~855~~190)
Contributions by limited partner - affiliate		800		—		—		800
Distributions to AHGP Partners		(~~109~~32,~~548~~925)		—		—		(~~109~~32,~~548~~925)
Distributions paid by consolidated partnership to noncontrolling interest		—		—		(5918,~~751~~948)		(5918,~~751~~948)
Balance at September 30, 2017	$	623,614	$	(25,270)	$	560,561	$	1,158,905
Balance at March 31, 2017	$	620,846	$	(16,395)	$	545,918	$	1,150,369

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	Alliance Holdings GP, L.P.
			Accumulated Other
	Limited Partners'		Comprehensive		Noncontrolling		Total Partners'
	Capital		Income (Loss)		Interest		Capital
	(in thousands)
Balance at January 1, 2016	$	567,259	$	(14,875)	$	441,748	$	994,132
Net income		124,722		—		92,643		217,365
Other comprehensive income		—		199		184		383
Settlement of directors deferred compensation		(164)		—		(335)		(499)
Vesting of ARLP Long-Term Incentive Plan		—		—		(1,001)		(1,001)
Common unit-based compensation		237		—		9,802		10,039
Distributions on ARLP common unit-based compensation		—		—		(2,673)		(2,673)
Contributions to consolidated company from affiliate noncontrolling interest		—		—		2,557		2,557
Distributions paid by consolidated company		—		—		(60)		(60)
Distributions to AHGP Partners		(123,318)		—		—		(123,318)
Distributions paid by consolidated partnership to noncontrolling interest		—		—		(67,007)		(67,007)
Balance at September 30, 2016	$	568,736	$	(14,676)	$	475,858	$	1,029,918

8. VARIABLE INTEREST ENTITIES

Cavalier Minerals

On November 10, 2014, the ARLP Partnership's subsidiary, Alliance Minerals, and Bluegrass Minerals Management, LLC ("Bluegrass Minerals") entered into a limited liability company agreement (the "Cavalier Agreement") to create Cavalier Minerals, which was formed to indirectly acquire oil and gas mineral interests, initially through its 71.7% noncontrolling ownership interest in AllDale I and subsequently through its 72.8% noncontrolling ownership interest in AllDale II. Bluegrass Minerals is owned and controlled by the ARH Officer discussed in Note 6 – Long-Term Debt and is Cavalier Minerals' managing member. Alliance Minerals and Bluegrass Minerals initially committed funding of $48.0 million and $2.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed funding of $49.0 million to AllDale I. On October 6, 2015, Alliance Minerals and Bluegrass Minerals committed to fund an additional $96.0 million and $4.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed to fund $100.0 million to AllDale II. Contributions in 2017 sufficiently completed funding to Cavalier Minerals for these commitments. Cavalier Minerals is not expected to call on further funding of these commitments from Alliance Minerals and Bluegrass Minerals.

1514

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~~Contributions~~AllDale ~~made~~I. On ~~from~~October 6, 2015, Alliance Minerals and Bluegrass Minerals committed to fund an additional $96.0 million and $4.0 million, respectively, to Cavalier Minerals, ~~for~~and ~~each~~Cavalier ~~period~~Minerals ~~presented~~committed ~~are~~to asfund ~~follows:~~$100.0 million to AllDale II. Alliance Minerals and Bluegrass Minerals contributed $143.1 million and $6.0 million, respectively, to Cavalier Minerals, which sufficiently completed funding to Cavalier Minerals for these commitments.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Alliance Minerals
Beginning cumulative commitment fulfilled	$	143,112	$	95,597	$	137,077	$	63,498
Capital contributions - Cash		—		30,184		6,035		61,360
Capital contributions - Net AllDale Minerals' distributions received by Cavalier Minerals (1)		—		385		—		1,308
Ending cumulative commitment fulfilled		143,112		126,166		143,112		126,166
Remaining commitment		888		17,834		888		17,834
Total committed	$	144,000	$	144,000	$	144,000	$	144,000
Bluegrass Minerals
Beginning cumulative commitment fulfilled	$	5,963	$	3,983	$	5,712	$	2,646
Capital contributions - Cash		—		1,258		251		2,557
Capital contributions - Net AllDale Minerals' distributions received by Cavalier Minerals (1)		—		16		—		54
Ending cumulative commitment fulfilled		5,963		5,257		5,963		5,257
Remaining commitment		37		743		37		743
Total committed	$	6,000	$	6,000	$	6,000	$	6,000

(1) Represents distributions received from AllDale Minerals net of distributions reinvested and payments to Bluegrass Minerals for administration expense.

In accordance with the Cavalier Agreement, Bluegrass Minerals is entitled to receive an incentive distribution from Cavalier Minerals equal to 25% of all distributions (including in liquidation) after all members have recovered their investment. The incentive distributions are reduced by certain distributions received by Bluegrass Minerals or its owner from AllDale Minerals Management, LLC ("AllDale Minerals Management"), the managing member of AllDale Minerals. Distributions paid to Alliance Minerals and Bluegrass Minerals from Cavalier Minerals for each period presented are as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Alliance Minerals	$	123,~~430~~888	$	14,~~444~~563	$	~~20,514~~	$	~~1,444~~
Bluegrass Minerals		~~518~~162		60190		~~855~~		60

Alliance Minerals' ownership interest in Cavalier Minerals ~~at September~~is ~~30, 2017 was~~ 96%. The remainder of the equity ownership is held by Bluegrass Minerals. The ARLP Partnership has consolidated Cavalier Minerals' financial results as it concluded that Cavalier Minerals is a variable interest entity ("VIE") and the ARLP Partnership is the primary beneficiary because neither Bluegrass Minerals nor Alliance Minerals individually has both the power and the benefits related to Cavalier Minerals and the ARLP Partnership is most closely aligned with Cavalier Minerals through its substantial equity ownership. Bluegrass Minerals' equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets. In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of income.

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WKY CoalPlay

On November 17, 2014, SGP Land, LLC ("SGP Land"), a wholly- owned subsidiary of SGP, and two limited liability companies ("Craft Companies") owned by irrevocable trusts established by the President and Chief Executive Officer of MGP, entered into a limited liability company agreement to form WKY CoalPlay, LLC ("WKY CoalPlay"). WKY CoalPlay was formed, in part, to purchase and lease coal reserves. WKY CoalPlay is managed by the ARH Officer discussed in Note 6 – Long-Term Debt, who is also an employee of SGP Land and trustee of the irrevocable trusts owning the Craft Companies. In December 2014 and February 2015, the ARLP Partnership entered into various coal reserve leases with WKY CoalPlay. During the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018, the ARLP Partnership paid $10.8 million of advanced royalties to WKY CoalPlay. As of ~~September 30~~March 31, ~~2017~~ 2018, the ARLP Partnership had $3040.07 million of advanced royalties outstanding under the leases, which is reflected in the Advance royalties, net line items in our condensed consolidated balance sheets.

The ARLP Partnership has concluded that WKY CoalPlay is a VIE because of its ability to exercise options to acquire reserves under lease with WKY CoalPlay, which is not within the control of the equity holders and, if it occurs, could potentially limit the expected residual return to the owners of WKY CoalPlay. The ARLP Partnership does not have any economic or governance rights related to WKY CoalPlay and the ARLP Partnership's options that provide it with a variable interest in WKY CoalPlay's reserve assets do not give it any rights that constitute power to direct the primary activities that most significantly impact WKY CoalPlay's economic performance. SGP Land has the sole ability to replace the manager of WKY CoalPlay at its discretion and therefore has power to direct the activities of WKY CoalPlay. Consequently, the ARLP Partnership concluded that SGP Land is the primary beneficiary of WKY CoalPlay.

The ARLP Partnership

ARLP is a publicly-traded master limited partnership (NASDAQ ticker "ARLP") created in 1999 to acquire certain coal production and marketing assets of ARH. As of ~~September~~March 3031, ~~2017~~2018, AHGP held directly and indirectly 66.76% of the limited partnership interests in ARLP in addition to a non-economic general partner interest in the ARLP Partnership through its 100% ownership of MGP. The limited partners do not have substantive kick-out rights to remove the general partner nor do they have substantive participating rights in the activities of ARLP, therefore we determined that ARLP is a variable interest entity. To determine the primary beneficiary of ARLP, we considered that AHGP through its 100% ownership of MGP has the sole ability to direct the activities of ARLP and with its ownership of 66.7% limited partner interest, has economic benefit that is significant to ARLP. As a result we determined that AHGP has both the power and benefits with respect to ARLP and is therefore the primary beneficiary and consolidates ARLP.

The Partnership Agreement (the "Agreement") of ARLP requires MGP to distribute on a quarterly basis 100% of ARLP’s available cash to ARLP's partners. Available cash is determined as defined in the Agreement and represents all cash with the exception of cash reserves (i) for the proper conduct of the business including reserves for future capital expenditures and for anticipated credit needs of the ARLP Partnership, (ii) to comply with debt obligations or (iii) to provide funds for certain subsequent distributions. MGP is required under the terms of the Agreement to meet the distribution requirements as discussed above. As discussed in Note 6 – Long-Term Debt, the Intermediate Partnership's debt covenants place additional restrictions on distributions from ARLP by limiting cash available for distribution based on various debt covenants pertaining to the most recent preceding quarter. MGP cannot hold cash reserves to provide for subsequent distributions if that would prevent ARLP from making its minimum quarterly distributions or any cumulative distributions in arrears. MGP does not have the ability to amend the Agreement without the consent of a majority of the limited partners.15

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of the limited partnership interests in ARLP in addition to a non-economic general partner interest in the ARLP Partnership through its 100% ownership of MGP. The limited partners do not have substantive kick-out rights to remove the general partner nor do they have substantive participating rights in the activities of ARLP, therefore we determined that ARLP is a variable interest entity. To determine the primary beneficiary of ARLP, we considered that AHGP through its 100% ownership of MGP has the sole ability to direct the activities of ARLP and with its ownership of 66.6% limited partner interest, has economic benefit that is significant to ARLP. As a result we determined that AHGP has both the power and benefits with respect to ARLP and is therefore the primary beneficiary and consolidates ARLP.

The Partnership Agreement (the "Agreement") of ARLP requires MGP to distribute on a quarterly basis 100% of ARLP's available cash to ARLP's partners. Available cash is determined as defined in the Agreement and represents all cash with the exception of cash reserves (i) for the proper conduct of the business including reserves for future capital expenditures and for anticipated credit needs of the ARLP Partnership, (ii) to comply with debt obligations or (iii) to provide funds for certain subsequent distributions. MGP is required under the terms of the Agreement to meet the distribution requirements as discussed above. As discussed in Note 6 – Long-Term Debt, the Intermediate Partnership's debt covenants place additional restrictions on distributions from ARLP by limiting cash available for distribution based on various debt covenants pertaining to the most recent preceding quarter. MGP cannot hold cash reserves to provide for subsequent distributions if that would prevent ARLP from making its minimum quarterly distributions or any cumulative distributions in arrears. MGP does not have the ability to amend the Agreement without the consent of a majority of the limited partners.

9. INVESTMENTS

AllDale Minerals

In November 2014, Cavalier Minerals (see Note 8 – Variable Interest Entities), was created to indirectly purchase, through its equity investments in AllDale Minerals, oil and gas mineral interests in various geographic locations within producing basins in the continental U.S. In February 2017, Alliance Minerals, which is included in our Other and Corporate category (see Note 1314 – Segment Information), committed to directly (rather than through Cavalier Minerals) invest $30.0 million in AllDale III which was created for similar investment purposes. The ARLP Partnership accounts for its ownership interest in the income or loss of ~~AllDale Minerals and AllDale III (collectively,~~ the " AllDale Partnerships") as equity method investments. The ARLP Partnership records equity income or loss based on the AllDale Partnerships' individual distribution structures. The changes in the ARLP Partnership's aggregate equity method investment in the AllDale Partnerships for each of the periods presented were as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Beginning balance	$	~~149~~147,~~592~~964	$	96138,~~670~~817	$	~~138,817~~	$	~~64,509~~
Contributions		311,~~900~~400		329,~~181~~287		~~16,487~~		~~65,367~~
Equity in income of affiliates		3,798		1,105		10,414		1,041
Equity method investment income		3,736		3,700
Distributions received		(124,~~941~~431)		(14,~~905~~752)		~~(21,369)~~		~~(2,866)~~
Ending balance	$	~~144~~158,~~349~~669	$	~~128~~147,~~051~~052	$	~~144,349~~	$	~~128,051~~

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Kodiak

On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak, a privately-held ~~gas compression~~ company providing large-scale, high-utilization gas compression assets to customers operating primarily in the Permian Basin. This structured investment provides the ARLP Partnership with a quarterly cash or payment-in-kind return. The ARLP Partnership's ownership interests in Kodiak are senior to all other Kodiak equity interests and subordinate only to Kodiak's senior secured debt facility. The ARLP Partnership accounts for its ownership interests in Kodiak as aequity ~~cost~~securities ~~method~~without ~~investment~~readily determinable fair values. It is not practicable to estimate the fair value of the ARLP Partnership's investment in Kodiak because of the lack of a quoted market price for its ownership interests, therefore the ARLP Partnership uses a measurement alternative other than fair value to account for its investment. The changes in the ARLP Partnership's investment in Kodiak for the three months ended ~~September~~March 3031, ~~2017~~2018 were as follows:

	Three Months Ended
	September 30,
	March 31,
	2017
	2018
	(in thousands)
Beginning balance	$	—106,398
Contributions		100,000
Payment-in-kind distributions received		3,724
Payment-in-kind distributions received		2,800
Ending balance	$	110,122
Ending balance	$	102,800

1810.

10. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table illustrates the disaggregation of our revenues by type, including a reconciliation to our segment presentation as presented in Note 14 – Segment Information, for the three months ended March 31, 2018 and 2017.


	Illinois				Other and
	Basin		Appalachia		Corporate		Elimination		Consolidated
	(in thousands)
Three Months Ended March 31, 2018

Coal sales	$	276,065	$	145,289	$	7,711	$	(5,455)	$	423,610
Transportation revenues		18,271		1,514		—		—		19,785
Other sales and operating revenues		569		829		16,533		(4,290)		13,641
Total revenues	$	294,905	$	147,632	$	24,244	$	(9,745)	$	457,036

Three Months Ended March 31, 2017

Coal sales	$	266,928	$	167,773	$	15,248	$	(11,205)	$	438,744
Transportation revenues		7,855		1,741		—		—		9,596
Other sales and operating revenues		772		730		15,276		(4,113)		12,665
Total revenues	$	275,555	$	170,244	$	30,524	$	(15,318)	$	461,005

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~~10. WORKERS~~The following table illustrates the amount of the ARLP Partnership's ~~COMPENSATION~~transaction ~~AND~~price ~~PNEUMOCONIOSIS~~for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2018 and disaggregated by segment and contract duration.


							2021 and
	2018		2019		2020		Thereafter		Total
	(in thousands)

Illinois Basin coal revenues	$	740,763	$	312,605	$	238,386	$	51,790	$	1,343,544
Appalachia coal revenues		470,006		284,994		157,843		38,224		951,067
Other and Corporate coal revenues		61,346		22,666		—		—		84,012
Elimination		(47,028)		(17,035)		—		—		(64,063)
Total coal revenues (1)	$	1,225,087	$	603,230	$	396,229	$	90,014	$	2,314,560

11. WORKERS' COMPENSATION AND PNEUMOCONIOSIS

The changes in the workers' compensation liability, including current and long-term liability balances, for each of the periods presented were as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Beginning balance	$	5954,~~981~~439	$	5648,~~403~~131	$	~~48,131~~	$	~~54,558~~
Accruals increase		12,~~999~~641		21,~~480~~974		~~16,673~~		~~7,904~~
Payments		(2,~~357~~797)		(2,~~238~~925)		~~(7,799)~~		~~(8,226)~~
Interest accretion		~~421~~363		~~492~~420		~~1,261~~		~~1,476~~
Valuation loss (1)		—		—		1,778		1,425
Ending balance	$	54,646	$	47,600
Ending balance	$	60,044	$	57,137	$	60,044	$	57,137

~~(1)~~ The ~~liability~~ARLP ~~for~~Partnership ~~the~~limits ~~estimated~~its ~~present~~exposure ~~value~~to oftraumatic ~~current~~injury ~~workers′~~claims ~~compensation~~by ~~benefits~~purchasing isa ~~based~~high ondeductible ~~the~~insurance ~~ARLP~~policy ~~Partnership's~~that ~~actuarial~~starts ~~estimates.~~paying ~~The~~benefits ~~ARLP~~after ~~Partnership's~~deductibles ~~actuarial~~for ~~calculations are based on~~ a ~~blend~~claim ofhave ~~actuarial~~been ~~projection~~met. The ~~methods~~deductible ~~and~~level ~~numerous~~may ~~assumptions~~vary ~~including~~by claim ~~development patterns, mortality, medical costs and interest rates~~year. The ARLP Partnership's ~~conducted~~workers' acompensation ~~mid-year~~liability ~~review~~above ofis ~~its~~presented ~~actuarial~~on ~~assumptions which resulted in~~ a ~~valuation~~gross ~~loss~~basis inand ~~2017~~does ~~primarily~~not ~~attributable~~include ~~to a decrease in~~ the ~~discount~~ARLP ~~rate~~Partnership's ~~used~~expected toreceivables ~~calculate~~on ~~the~~its ~~estimated~~insurance ~~present value of future obligations from 3~~policy.~~52% at December 31, 2016 to 3.38% at June 30, 2017 and unfavorable changes in claims development.~~ The ARLP Partnership's ~~mid-year~~receivables ~~2016~~for ~~actuarial~~traumatic ~~review~~injury ~~resulted~~claims inunder athis ~~valuation~~policy ~~loss~~as ~~primarily attributable to a decrease in the discount rate used to calculate the estimated present value~~ of ~~future~~March ~~obligations from 3.63% at December~~ 31, ~~2015~~2018 toare 2$9.~~89%~~0 atmillion ~~June~~and ~~30,~~are ~~2016,~~included ~~partially~~in ~~offset~~Other bylong-term ~~favorable~~assets ~~changes~~on inour ~~claims~~condensed ~~development~~consolidated balance sheet.

Certain of the ARLP Partnership's mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents. Components of the net periodic benefit cost for each of the periods presented are as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Service cost	$	~~580~~630	$	~~644~~546	$	~~1,682~~	$	~~1,936~~
Interest cost		649		627		1,906		1,880
Interest cost (1)		635		629
Amortization of net actuarial gain (1)		(479)		(660)		(1,613)		(1,982)
Net amortization (1)		1		(567)
Net periodic benefit cost	$	~~750~~1,266	$	~~611~~608	$	~~1,975~~	$	~~1,834~~

(1) ~~Amortization~~Interest ofcost and net ~~actuarial~~amortization ~~gain~~ is included in the ~~Operating~~Other ~~expenses~~income (~~excluding depreciation, depletion and amortization~~expense) line item within our condensed consolidated statements of income (see Note 2. New Accounting Standards).

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1112. COMPENSATION PLANS

ARLP Long-Term Incentive Plan

The ARLP Partnership has the ARLP LTIP for certain employees and officers of MGP and its affiliates who perform services for the ARLP Partnership. The ARLP LTIP awards are grants of non-vested "phantom" or notional units, also referred to as "restricted units", which upon satisfaction of time and performance based vesting requirements, entitle the ARLP LTIP participant to receive ARLP common units. Annual grant levels and vesting provisions for designated participants are recommended by the President and Chief Executive Officer of MGP, subject to review and approval of the MGP Compensation Committee (the "Compensation Committee"). Vesting of all grants outstanding ~~are~~is subject to the satisfaction of certain financial tests, which management currently believes ~~are~~is probable. Grants issued to ARLP LTIP participants are expected to cliff vest on January 1st of the third year following issuance of the grants. The ARLP Partnership accounts for forfeitures of non-vested ARLP LTIP grants as they occur. The ARLP Partnership expects to settle the non-vested ARLP LTIP grants by delivery of ARLP common units, except for the portion of the grants that will satisfy employee tax withholding obligations of ARLP LTIP participants. As provided under the distribution equivalent rights ("DERs") provisions of the ARLP LTIP and the terms of the ARLP LTIP awards, all non-vested grants include contingent rights to receive quarterly distributions in cash or at the discretion of the MGP Compensation Committee, in lieu of cash, phantom units credited to a bookkeeping account with value, equal to the cash distributions we make to unitholders during the vesting period.

A summary of non-vested ARLP LTIP grants as of and for the three months ended March 31, 2018 is as follows:


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Non-vested grants at January 1, 2018	1,694,026	$	19.62	$	33,372
Granted	511,305		20.40
Vested (1)	(290,706)		37.18
Forfeited	(16,930)		16.19
Non-vested grants at March 31, 2018	1,897,695		17.17		33,494

(1)

During the three months ended March 31, 2018, the ARLP Partnership issued 191,858 unrestricted common units to the ARLP LTIP participants. The remaining vested units were settled in cash to satisfy tax withholding obligations of the ARLP LTIP participants.

ARLP LTIP expense was $2.7 million and $2.6 million for the three months ended March 31, 2018 and 2017, respectively. The total obligation associated with the ARLP LTIP as of March 31, 2018 was $13.6 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheets. As of March 31, 2018, there was $18.9 million in total unrecognized compensation expense related to the non-vested ARLP LTIP grants that are expected to vest. That expense is expected to be recognized over a weighted-average period of 1.5 years.

After consideration of the January 1, 2018 vesting and subsequent issuance of 191,858 common units, approximately 2.1 million units remain available under the ARLP LTIP for issuance in the future, assuming all grants issued in 2018, 2017 and 2016 and currently outstanding are settled with ARLP common units without reduction for tax withholding, no future forfeitures occur and DERs continue being paid in cash versus additional phantom units.

AHGP Long-Term Incentive Plan

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~~vest~~amount onof ~~January~~cash ~~1st~~upon of the ~~third~~vesting ~~year following issuance~~ of the ~~grants~~phantom unit. The ~~ARLP~~aggregate ~~Partnership~~number ~~expects to settle the non-vested ARLP LTIP grants by delivery~~ of ~~ARLP~~ common units, ~~except~~reserved for ~~the~~issuance ~~portion of the grants that will satisfy tax withholding obligations of ARLP LTIP participants. As provided~~ under the ~~distribution~~AHGP ~~equivalent rights provisions of the ARLP~~ LTIP ~~and~~is ~~the terms of the ARLP LTIP awards~~5, ~~all non-vested grants include contingent rights to receive quarterly distributions in cash or~~215,000. There inhave ~~the~~been ~~case~~no ~~of the 2016 and 2017~~ grants, atunder the ~~discretion~~AHGP ofLTIP ~~the~~as ~~MGP Compensation Committee, cash or in lieu~~ of ~~cash,~~March ~~phantom units credited to a bookkeeping account with value~~31, ~~equal to the cash distributions we make to unitholders during the vesting period~~2018.

A summary of non-vested ARLP LTIP grants as of and for the nine months ended September 30, 2017 is as follows:

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Non-vested grants at January 1, 2017	1,604,748	$	23.19	$	36,027
Granted	475,310		23.17
Vested (1)	(350,516)		40.73
Forfeited	(35,516)		20.01
Non-vested grants at September 30, 2017	1,694,026		19.62		32,779

(1) During the nine months ended September 30, 2017, the ARLP Partnership issued 222,011 unrestricted common units to the ARLP LTIP participants. The remaining vested units were settled in cash to satisfy tax withholding obligations of the ARLP LTIP participants.

ARLP LTIP expense was $2.8 million and $3.1 million for the three months ended September 30, 2017 and 2016, respectively, and $8.2 million and $9.0 million for the nine months ended September 30, 2017 and 2016, respectively. The total obligation associated with the ARLP LTIP as of September 30, 2017 was $18.9 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheets. As of September 30, 2017, there was $14.3 million in total unrecognized compensation expense related to the non-vested ARLP LTIP grants that are expected to vest. That expense is expected to be recognized over a weighted-average period of 1.4 years.

After consideration of the January 1, 2017 vesting and subsequent issuance of 222,011 common units, approximately 2.5 million units remain available under the ARLP LTIP for issuance in the future, assuming all grants issued in 2017, 2016 and 2015 and currently outstanding are settled with ARLP common units, without reduction for tax withholding, and no future forfeitures occur.

AHGP Long-Term Incentive Plan

We have also adopted a Long-Term Incentive Plan (the "AHGP LTIP") for employees, directors and consultants of our general partner and its affiliates, including the ARLP Partnership. Grants under the AHGP LTIP are to be made in AHGP restricted units, which are "phantom" units that entitle the grantee to receive either a common unit or equivalent amount of cash upon the vesting of the phantom unit. The aggregate number of common units reserved for issuance under the AHGP LTIP is 5,215,000. There have been no grants under the AHGP LTIP as of September 30, 2017.

SERP and Directors Deferred Compensation Plans

The ARLP Partnership has a SERP to provide deferred compensation benefits for certain officers and key employees. All allocations made to participants under the SERP are made in the form of "phantom" ARLP units and SERP distributions will be settled in the form of ARLP common units. The SERP is administered by the MGP Compensation Committee.

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Our directors participate in the AGP Amended and Restated Deferred Compensation Plan for Directors ("AGP Deferred Compensation Plan"), and the directors of MGP participate in the MGP Deferred Compensation Plan (collectively, the "Deferred Compensation Plans"). Pursuant to the Deferred Compensation Plans, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP or AHGP, as appropriate, which are described in the Deferred Compensation Plans as "phantom" units. Distributions from the Deferred Compensation Plans will be settled in the form of ARLP or AHGP common units, as applicable.

For both the SERP and Deferred Compensation Plans, when quarterly cash distributions are made with respect to ARLP or AHGP common units, an amount equal to such quarterly distribution is credited to each participant's notional account as additional phantom units. All grants of phantom units under the SERP and Deferred Compensation Plans vest immediately.

A summary of SERP and MGP Deferred Compensation Plan activity as of and for the ~~nine~~three months ended ~~September 30~~March 31, ~~2017~~ 2018 is as follows:

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Phantom units outstanding as of January 1, 2017	494,018	$	29.77	$	11,091
Phantom units outstanding as of January 1, 2018	561,784	$	28.64	$	11,067
Granted	4018,~~359~~676		2118.2253
Phantom units outstanding as of September 30, 2017	534,377		29.13		10,340
Issued (1)	(10,364)		27.92
Phantom units outstanding as of March 31, 2018	570,096		28.32		10,062

~~Total~~(1) ~~SERP~~During ~~and MGP Deferred Compensation Plan expense was $0.3 million for each of~~ the three months ended ~~September 30~~March 31, ~~2017 and 2016~~2018, ~~and $1.0 million and $0.9 million for~~ the ~~nine~~ARLP ~~months~~Partnership ~~ended~~issued ~~September 30~~7,181 ~~2017~~ARLP ~~and~~common ~~2016,~~units ~~respectively. As~~to ~~of September~~a ~~30,~~participant ~~2017,~~under the ~~total obligation associated with the~~ SERP. ~~and~~Units ~~MGP~~issued ~~Deferred~~to ~~Compensation~~this ~~Plan~~participant ~~was~~were ~~$15.6 million~~net ~~and~~of isunits ~~included~~settled in ~~Noncontrolling~~cash ~~interests~~to ~~line~~satisfy ~~item~~tax inwithholding ~~our condensed consolidated balance sheet~~obligations.

ATotal ~~summary~~SERP ofand ~~the~~MGP ~~AGP~~ Deferred Compensation Plan ~~activity~~expense aswas of$0.4 million and $0.3 million for the ~~nine~~three months ended ~~September~~March 3031, 2018 and 2017, respectively. As of March 31, 2018, the total obligation associated with the SERP and MGP Deferred Compensation Plan was $16.1 million and is asincluded ~~follows:~~in Noncontrolling interests line item in our condensed consolidated balance sheet.

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Phantom units outstanding as of January 1, 2017	26,112	$	36.67	$	734
Granted	1,520		27.91
Issued	(4,357)		39.18
Phantom units outstanding as of September 30, 2017	23,275		35.63		647

Total AGP Deferred Compensation Plan expense was $16,075 and $52,775 for the three months ended September 30, 2017 and 2016, respectively, and $41,943 and $164,203 for the nine months ended September 30, 2017 and 2016, respectively. The total obligation associated with the AGP Deferred Compensation Plan as of September 30, 2017 was $0.8 million and is included in Limited partners – Common Unitholders line item in our condensed consolidated balance sheets.

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~~12. COMPONENTS~~A OFsummary ~~PENSION~~of ~~PLAN~~the ~~NET~~AGP ~~PERIODIC~~Deferred ~~BENEFIT~~Compensation ~~COSTS~~Plan activity as of and for the three months ended March 31, 2018 is as follows:

Eligible employees at certain of the ARLP Partnership's mining operations participate in a defined benefit plan (the "Pension Plan") sponsored by the ARLP Partnership. The Pension Plan is currently closed to new applicants and effective January 31, 2017, participants in the Pension Plan are no longer receiving benefit accruals for service. The amendment did not affect pension benefits accrued prior to January 31, 2017. The benefit formula for the Pension Plan is a fixed dollar unit based on years of service. Components of the net periodic benefit cost for each of the periods presented are as follows:


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Phantom units outstanding as of December 31, 2017	23,923	$	35.36	$	641
Granted	638		26.46
Issued	(9,851)		20.52
Phantom units outstanding as of March 31, 2018	14,710		44.92		368

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Service cost	$	—	$	524	$	—	$	1,720
Interest cost		1,138		1,118		3,408		3,381
Expected return on plan assets		(1,240)		(1,363)		(3,743)		(3,937)
Amortization of prior service cost (1)		46		—		140		—
Amortization of net loss (1)		774		787		2,319		2,365
Net periodic benefit cost	$	718	$	1,066	$	2,124	$	3,529

Total AGP Deferred Compensation Plan expense was $16,881 and $14,392 for the three months ended March 31, 2018 and 2017, respectively. The total obligation associated with the AGP Deferred Compensation Plan as of March 31, 2018 was $0.7 million and is included in Limited partners – Common Unitholders line item in our condensed consolidated balance sheets.

~~(1)~~ 13. COMPONENTS ~~Amortization~~OF ofPENSION ~~prior~~PLAN ~~service~~NET ~~cost~~PERIODIC ~~and~~BENEFIT ~~net actuarial loss is included in the Operating expenses (excluding depreciation, depletion and amortization) line item within our condensed consolidated statements of income.~~COSTS

~~During~~Eligible ~~the~~employees ~~nine~~at ~~months~~certain ~~ended~~of ~~September 30, 2017,~~ the ARLP Partnership's ~~made~~mining ~~contribution~~operations ~~payments~~participate ofin ~~$1.1~~a ~~million~~defined tobenefit plan (the "Pension Plan") ~~for~~sponsored by the ~~2016~~ARLP ~~plan~~Partnership. The ~~year~~Pension ~~and~~Plan ~~$1.2~~is ~~million~~currently ~~for~~closed to new applicants and participants in the ~~2017~~Pension ~~plan~~Plan ~~year~~are no longer receiving benefit accruals for service. On The ~~October~~benefit ~~16,~~formula ~~2017,~~for the ~~ARLP~~Pension ~~Partnership~~Plan ~~made~~is a ~~contribution~~fixed ~~payment~~dollar unit based on years of $0service.6 Components ~~million~~of the net periodic benefit cost for each of the ~~2017~~periods ~~plan~~presented ~~year.~~are as follows:

13. SEGMENT INFORMATION


	Three Months Ended
	March 31,
	2018		2017
	(in thousands)
Interest cost	$	1,116	$	1,135
Expected return on plan assets		(1,436)		(1,252)
Amortization of prior service cost		47		47
Amortization of net loss		969		773
Net periodic benefit cost (1)	$	696	$	703

(1)

Net periodic benefit cost for the Pension Plan is included in the Other income (expense) line item within our condensed consolidated statements of income (see Note 2. New Accounting Standards).

During the three months ended March 31, 2018, the ARLP Partnership made contribution payments of $0.7 million to the Pension Plan for the 2017 plan year and $1.5 million for the 2018 plan year. On April 13, 2018, the ARLP Partnership made a contribution payment of $0.7 million for the 2018 plan year.

14. SEGMENT INFORMATION

The ARLP Partnership operates in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users. We aggregate multiple operating segments into two reportable segments, Illinois Basin and Appalachia, and we have an "all other" category referred to as Other and Corporate. Our reportable segments correspond to major coal producing regions in the eastern U.S. Similar economic characteristics for our operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

The Illinois Basin reportable segment is comprised of multiple operating segments, including currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex, (b) Gibson County Coal, LLC's mining complex, which includes the Gibson North (currently idled) and Gibson South mines, (c) Warrior Coal, LLC's mining complex, (d) River View Coal, LLC's mining complex and (e) Hamilton County Coal, LLC's mining complex. The Gibson North mine has been idled since the fourth quarter of 2015 in response to market conditions.

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complex, which includes the Gibson North (currently idled) and Gibson South mines, (c) Warrior Coal, LLC's mining complex, (d) River View Coal, LLC's mining complex and (e) Hamilton County Coal, LLC's mining complex. The Gibson North mine was idled in the fourth quarter of 2015 in response to market conditions but is expected to resume production in May 2018.

The Illinois Basin reportable segment also includes White County Coal, LLC's Pattiki mining complex ("Pattiki"), Hopkins County Coal, LLC's mining complex, which includes the Elk Creek mine, the Pleasant View surface mineable reserves and the Fies underground project, Sebree Mining, LLC's mining complex, which includes the Onton mine, Steamport, LLC and certain reserves, CR Services, LLC, CR Machine Shop, LLC, certain properties and equipment of Alliance Resource Properties, ARP Sebree, LLC, ARP Sebree South, LLC and UC Coal, LLC and its subsidiaries, UC Mining, LLC and UC Processing, LLC (collectively "UC Coal"). The Pattiki mine ceased production in December 2016. The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016. The Onton mine has been idled since the fourth quarter of 2015 in response to market conditions. UC Coal equipment assets acquired in 2015 continue to be deployed as needed at various Illinois Basin operating mines.

The Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge, LLC mining complex and the MC Mining, LLC mining complex. The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.

Other and Corporate includes the ARLP Partnership and AHGP's marketing and administrative activities, Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, the Matrix Design entities and Alliance Design are referred to as the "Matrix Group"), ASI's ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities, Alliance Coal's coal brokerage activity, Mid-America Carbonates, LLC ("MAC"), certain of Alliance Resource Properties' land and mineral interest activities, Pontiki Coal, LLC's prior workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, Alliance Minerals, and its affiliate, Cavalier Minerals (Note 8 – Variable Interest Entities), both of which hold equity investments in various AllDale Partnerships (Note 9 – Investments), the ARLP Partnership's investment in Kodiak (Note 9 – Investments), and AROP Funding and Alliance Finance (both discussed in Note 6 – Long-Term Debt).

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~~The~~Reportable ~~Appalachia reportable~~ segment isresults ~~comprised~~as of ~~multiple~~and ~~operating~~for ~~segments, including~~ the ~~Mettiki~~three ~~mining~~months ~~complex,~~ended ~~the~~March ~~Tunnel Ridge~~31, ~~LLC~~2018 ~~mining complex~~ and ~~the~~2017 MCare ~~Mining,~~presented ~~LLC mining complex~~below. ~~The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.~~

Other and Corporate includes the ARLP Partnership and AHGP's marketing and administrative expenses, Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, the Matrix Design entities and Alliance Design are referred to as the "Matrix Group"), ASI's ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities, Alliance Coal's coal brokerage activity, Mid-America Carbonates, LLC ("MAC"), certain of Alliance Resource Properties' land and mineral interest activities, Pontiki Coal, LLC's throughput receivables and prior workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), Alliance Minerals, and its affiliate, Cavalier Minerals (Note 8 – Variable Interest Entities), both of which hold equity investments in various AllDale Partnerships (Note 9 – Investments), AROP Funding and the ARLP Partnership's new subsidiary formed March 30, 2017, Alliance Finance (both discussed in Note 6 – Long-Term Debt). On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak (Note 9 – Investments).


	Illinois				Other and		Elimination
	Basin		Appalachia		Corporate		(1)		Consolidated
	(in thousands)
Three Months Ended March 31, 2018

Revenues - Outside	$	289,518	$	147,565	$	19,953	$	—	$	457,036
Revenues - Intercompany		5,387		67		4,291		(9,745)		—
Total revenues (2)		294,905		147,632		24,244		(9,745)		457,036

Segment Adjusted EBITDA Expense (3)		181,803		92,498		12,798		(7,640)		279,459
Segment Adjusted EBITDA (4)		94,830		53,621		18,906		(2,105)		165,252
Total assets		1,425,798		463,857		523,660		(168,547)		2,244,768
Capital expenditures		37,448		13,376		701		—		51,525

Three Months Ended March 31, 2017

Revenues - Outside	$	264,350	$	170,244	$	26,411	$	—	$	461,005
Revenues - Intercompany		11,205		—		4,113		(15,318)		—
Total revenues (2)		275,555		170,244		30,524		(15,318)		461,005

Segment Adjusted EBITDA Expense (3)		161,437		95,317		17,838		(13,098)		261,494
Segment Adjusted EBITDA (4)		106,263		73,187		16,386		(2,221)		193,615
Total assets		1,426,551		479,375		420,876		(117,989)		2,208,813
Capital expenditures		17,189		12,780		377		—		30,346

(1)

The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group and MAC to the ARLP Partnership's mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding and insurance premiums paid to Wildcat Insurance.

(2)

Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates, MAC revenues, Wildcat Insurance revenues and brokerage coal sales.

(3)

Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to the ARLP Partnership's customers and consequently it does not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends.

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Reportable segment results as of and for the three and nine months ended September 30, 2017 and 2016 are presented below.

	Illinois				Other and		Elimination
	Basin		Appalachia		Corporate		(1)		Consolidated
	(in thousands)
Three Months Ended September 30, 2017
Revenues - Outside	$	266,931	$	152,865	$	33,291	$	—	$	453,087
Revenues - Intercompany		18,446		1,390		3,977		(23,813)		—
Total revenues (2)		285,377		154,255		37,268		(23,813)		453,087
Segment Adjusted EBITDA Expense (3)		192,465		97,316		26,421		(21,591)		294,611
Segment Adjusted EBITDA (4)		86,377		55,465		17,445		(2,222)		157,065
Capital expenditures		26,328		11,126		484		—		37,938
Three Months Ended September 30, 2016
Revenues - Outside	$	360,221	$	154,852	$	36,893	$	—	$	551,966
Revenues - Intercompany		18,267		—		4,826		(23,093)		—
Total revenues (2)		378,488		154,852		41,719		(23,093)		551,966
Segment Adjusted EBITDA Expense (3)		227,526		94,201		26,664		(20,279)		328,112
Segment Adjusted EBITDA (4)		145,424		58,497		16,160		(2,814)		217,267
Capital expenditures		10,893		10,306		466		—		21,665
Nine Months Ended September 30, 2017
Revenues - Outside	$	763,765	$	458,815	$	90,131	$	—	$	1,312,711
Revenues - Intercompany		46,740		1,390		11,985		(60,115)		—
Total revenues (2)		810,505		460,205		102,116		(60,115)		1,312,711
Segment Adjusted EBITDA Expense (3)		504,201		276,252		67,382		(53,451)		794,384
Segment Adjusted EBITDA (4)		285,928		179,396		47,948		(6,664)		506,608
Total assets		1,406,831		468,580		458,421		(123,073)		2,210,759
Capital expenditures		66,444		37,167		1,844		—		105,455
Nine Months Ended September 30, 2016
Revenues - Outside	$	921,796	$	407,406	$	74,530	$	—	$	1,403,732
Revenues - Intercompany		40,448		3,806		13,723		(57,977)		—
Total revenues (2)		962,244		411,212		88,253		(57,977)		1,403,732
Segment Adjusted EBITDA Expense (3)		567,214		261,933		63,575		(49,336)		843,386
Segment Adjusted EBITDA (4)		381,042		143,699		25,555		(8,641)		541,655
Total assets		1,541,513		480,920		374,810		(148,438)		2,248,805
Capital expenditures		41,264		27,317		1,686		—		70,267

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group and MAC to the ARLP Partnership's mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding and insurance premiums paid to Wildcat Insurance.

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(2) Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, MAC revenues, Wildcat Insurance revenues and brokerage coal sales.

(3) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to the ARLP Partnership's customers and consequently it does not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends. Results presented for Segment Adjusted EBITDA Expense for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization).

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to Operating expenses (excluding depreciation, depletion and amortization):

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Segment Adjusted EBITDA Expense	$	~~294~~279,~~611~~459	$	~~328~~261,~~112~~494	$	~~794,384~~	$	~~843,386~~
Outside coal purchases		—(1,374)		~~(1,514)~~—		—		~~(1,514)~~
Other income		774		293		2,461		545
Other (expense) income		(847)		533
Operating expenses (excluding depreciation, depletion and amortization)	$	~~295~~277,~~385~~238	$	~~326~~262,~~891~~027	$	~~796,845~~	$	~~842,417~~

(4) Segment Adjusted EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and ~~debt~~settlement ~~extinguishment loss~~gain. Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to the ARLP Partnership's revenues and operating expenses, which are primarily controlled by ~~our~~its segments. Results presented for Segment Adjusted EBITDA for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization). Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	~~157~~165,~~065~~252	$	~~217~~193,~~267~~615	$	~~506,608~~	$	~~541,655~~
General and administrative		(1517,~~389~~145)		(1816,~~987~~447)		~~(47,160)~~		~~(55,175)~~
Depreciation, depletion and amortization		(6961,~~962~~848)		(~~101~~65,~~432~~127)		~~(194,109)~~		~~(245,736)~~
Interest expense, net		(10,767)		(7,998)		(28,817)		(23,375)
Settlement gain		80,000		—
Debt extinguishment loss		—		—		(8,148)		—
Interest expense, net		(10,790)		(7,491)
Income tax (expense) benefit		(4)		(6)		3		(4)
Income tax benefit		10		12
Net income	$	60155,~~943~~479	$	88104,~~844~~562	$	~~228,377~~	$	~~217,365~~

15. SUBSEQUENT EVENTS

On April 27, 2018, we declared a quarterly distribution for the quarter ended March 31, 2018 of $0.7475 per unit on all common units outstanding, totaling approximately $44.7 million, payable on May 18, 2018 to all unitholders of record as of May 11, 2018.

Simplification Transactions

On February 22, 2018, the board of directors of ARLP's general partner and the board of directors of our general partner approved a simplification agreement (the "Simplification Agreement"), pursuant to which, among other things, through a series of transactions (the "Simplification Transactions"), (i) we would become a wholly owned subsidiary of ARLP, (ii) all of our issued and outstanding common units would be canceled and converted into the right to receive all of the ARLP common units held by us and our subsidiaries, (iii) in exchange for a number of ARLP common units calculated pursuant to the Simplification Agreement, MGP's 1.0001% general partner interest in the Intermediate Partnership and MGP's 0.001% managing member interest in Alliance Coal would be contributed to the ARLP Partnership, and (iv) MGP will remain the sole general partner of ARLP, and no control, management, or governance changes with respect to ARLP's business is expected to occur.

The consummation of the Simplification Transactions requires the SEC declare the effectiveness of a registration statement on Form S-4 under the Securities Act of 1933 to register the distribution of the ARLP common units currently held by us and our subsidiaries to our unitholders upon closing of the Simplification Transactions. ARLP filed a preliminary Form S-4 on March 29, 2018, which was declared effective on April 26, 2018. The consummation of the

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Simplification Transactions also requires the affirmative vote or consent of the holders of a majority of our outstanding common units. We mailed consent solicitation statements to our unitholders of record as of April 25, 2018. Certain of our unitholders, which collectively owned a majority of our outstanding common units as of the consent record date, have delivered written consents approving the Simplification Agreement pursuant to a support agreement. The Simplification Transactions are expected to close during the second quarter of 2018 subsequent to our quarterly distributions discussed above and the filing of this Form 10-Q. The closing of the Simplification Transactions will result in our no longer being a publicly traded company.

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14. SUBSEQUENT EVENTS

On October 27, 2017, we declared a quarterly distribution for the quarter ended September 30, 2017, of $0.735 per unit on all common units outstanding, totaling approximately $44.0 million, payable on November 17, 2017 to all unitholders of record as of November 9, 2017.

On October 27, 2017, the ARLP Partnership declared a quarterly distribution for the quarter ended September 30, 2017, of $0.505 per unit, on all common units outstanding, totaling approximately $66.7 million, including distributions of $0.7 million to MGP with respect to its general partner interest in the Intermediate Partnership, payable on November 14, 2017 to all unitholders of record as of November 7, 2017.

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Significant relationships referenced in this management's discussion and analysis of financial condition and results of operations include the following:

References to "we," "us," "our" or "AHGP" mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

References to "AGP" mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., also referred to as our general partner.

References to "ARLP Partnership" mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

References to "ARLP" mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's sole general partner.

References to "SGP" mean Alliance Resource GP, LLC, ARLP's special general partner prior to the Exchange Transaction discussed below.

References to "Intermediate Partnership" mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

References to "Alliance Resource Properties" mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

References to "Alliance Coal" mean Alliance Coal, LLC, the holding company for the mining operations of Alliance Resource Operating Partners, L.P.

Summary

Our cash flows currently consist primarily of distributions from ARLP for our ARLP partnership interests. We reflect our ownership interest in the ARLP Partnership on a consolidated basis, which means that our financial results are combined with the ARLP Partnership's financial results and the results of our other subsidiaries. The earnings of the ARLP Partnership allocated to its limited partners' interest not owned by us and allocated to SGP's general partner interests in the ARLP Partnership prior to the Exchange Transaction discussed below are reflected as a noncontrolling interest in our condensed consolidated statement of income and balance sheet. In addition to the ARLP Partnership, our results of operations include the results of operations of MGP II and MGP, our indirect wholly- owned subsidiaries.

The AHGP Partnership's results of operations principally reflect the results of operations of the ARLP Partnership adjusted for noncontrolling partners' interest in the ARLP Partnership's net income. Accordingly, the discussion of our financial position and results of operations in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" reflects the operating activities and results of operations of the ARLP Partnership.

The ARLP Partnership is a diversified producer and marketer of coal primarily to major United States ("U.S.") utilities and industrial users. The ARLP Partnership began mining operations in 1971 and, since then, has grown through acquisitions and internal development to become the second largest coal producer in the eastern U.S. As is customary in the coal industry, the ARLP Partnership has entered into long-term coal supply agreements with many of its customers. The ARLP Partnership operates eight underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia, as well as a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. ~~The~~In addition, the ARLP Partnership ~~also~~owns ~~generates~~equity ~~income~~interests ~~from other sources including investments~~ in various oil and gas ~~royalty~~mineral interests and ~~midstream~~gas compression services in various geographic locations within producing basins in the continental U.S.

We have two reportable segments: Illinois Basin and Appalachia, and an "all other" category referred to as Other and Corporate. Our reportable segments correspond to major coal producing regions in the eastern U.S. Factors similarly affecting financial performance of our operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

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affecting financial performance of our operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

Illinois Basin reportable segment is comprised of multiple operating segments, including currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex ("Dotiki"), (b) Gibson County Coal, LLC's mining complex, which includes the Gibson North (currently idled) and Gibson South mines, (c) Warrior Coal, LLC's mining complex ("Warrior"), (d) River View Coal, LLC's mining complex ("River View") and (e) Hamilton County Coal, LLC's mining complex ("Hamilton"). The Gibson North mine was idled in the fourth quarter of 2015 in response to market conditions but is expected to resume production in May 2018.

The Illinois Basin reportable segment also includes White County Coal, LLC's Pattiki mining complex ("Pattiki"), Hopkins County Coal, LLC's mining complex, which includes the Elk Creek mine ("Elk Creek"), the Pleasant View surface mineable reserves and the Fies underground project, Sebree Mining, LLC's mining complex, which includes the Onton mine, Steamport, LLC and certain reserves, CR Services, LLC, CR Machine Shop, LLC, certain properties and equipment of Alliance Resource Properties, ARP Sebree, LLC, ARP Sebree South, LLC and UC Coal, LLC and its subsidiaries, UC Mining, LLC and UC Processing, LLC (collectively "UC Coal"). The Pattiki mine ceased production in December 2016. The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016. The Onton mine has been idled since the fourth quarter of 2015 in response to market conditions. UC Coal equipment assets acquired in 2015 continue to be deployed as needed at various Illinois Basin operating mines.

Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex ("Mettiki"), the Tunnel Ridge, LLC mining complex ("Tunnel Ridge"), and the MC Mining, LLC mining complex ("MC Mining"). Mettiki includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.

Other and Corporate includes marketing and administrative activities, Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC ("Matrix Design") and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD, Alliance Design Group, LLC, ASI's ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities, Alliance Coal's coal brokerage activity, Mid-America Carbonates, LLC's manufacturing and sales (primarily to the ARLP Partnership's mines) of rock dust, certain of Alliance Resource Properties' land and mineral interest activities, Pontiki Coal, LLC's legacy workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, Alliance Minerals, LLC ("Alliance Minerals") which holds direct equity investments in AllDale Minerals III, LP (AllDale III") and Alliance Minerals' affiliate, Cavalier Minerals JV, LLC ("Cavalier Minerals"), both of which hold equity investments in AllDale Minerals, LP and AllDale Minerals II, LP (collectively with AllDale III, the "AllDale Partnerships"), Alliance Mineral's investment in Kodiak Gas Services, LLC ("Kodiak"), AROP Funding, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance"). Please read "Item 1. Financial Statements (Unaudited) – Note 6. Long-term Debt", "– Note 8. Variable Interest Entities" and "– Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on AROP Funding, Alliance Finance, Alliance Minerals, Cavalier Minerals, the AllDale Partnerships and Kodiak.

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

We reported net income attributable to AHGP of $103.7 million for the three months ended March 31, 2018 ("2018 Quarter") compared to $55.0 million for the three months ended March 31, 2017 ("2017 Quarter"). The increase of $48.7 million was principally due to an $80.0 million net gain on settlement of litigation, distributions of additional preferred interests received from our recent investment in gas compression services and lower depreciation, depletion, and amortization, partially offset by lower revenues and increased operating expenses. Total revenues decreased to $457.0

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·million ~~Illinois~~in ~~Basin~~the ~~reportable~~2018 ~~segment~~Quarter iscompared ~~comprised~~to of$461.0 ~~multiple~~million ~~operating~~in ~~segments, including currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex ("Dotiki"); (b) Gibson County Coal, LLC's mining complex, which includes~~ the ~~Gibson~~2017 ~~North (currently idled) and Gibson South mines; (c) Warrior Coal~~Quarter, ~~LLC's~~as ~~mining~~coal ~~complex~~sales ~~("Warrior");~~revenues ~~(d)~~declined ~~River~~due ~~View~~to ~~Coal,~~lower ~~LLC's~~coal ~~mining~~sales ~~complex~~volumes resulting ~~("River~~from ~~View")~~weather-related ~~and~~transportation ~~(e) Hamilton County Coal~~disruptions, ~~LLC's~~along ~~mining~~with ~~complex~~lower ~~("Hamilton").~~coal ~~The~~sale ~~Gibson North mine has been idled since the fourth quarter of 2015 in response to market conditions~~prices.

~~The~~Regarding ~~Illinois~~our ~~Basin~~increase ~~reportable~~in ~~segment~~net ~~also~~income ~~includes~~resulting ~~White~~from ~~County~~higher ~~Coal~~ARLP quarterly distributions, ~~LLC's~~the ~~Pattiki~~increased ~~mining~~distributions ~~complex~~from ~~("Pattiki");~~ARLP ~~Hopkins~~resulted ~~County~~from ~~Coal,~~(a) ~~LLC~~ARLP's ~~mining~~17.7% ~~complex,~~higher ~~which~~quarterly ~~includes~~unit ~~the~~distribution ~~Elk~~rate ~~Creek~~and ~~mine~~ (~~"Elk Creek"~~b), the ~~Pleasant~~increased ~~View~~number ~~surface~~of ~~mineable~~ARLP ~~reserves~~common ~~and~~units ~~the~~we ~~Fies~~hold ~~underground~~resulting ~~project;~~from ~~Sebree~~the ~~Mining,~~Exchange ~~LLC's~~Transaction ~~mining~~discussed ~~complex,~~below. Higher ~~which~~distributions ~~includes~~to ~~the~~us ~~Onton~~from ~~mine,~~ARLP ~~Steamport,~~increases ~~LLC~~our ~~and~~income ~~certain~~allocation ~~reserves;~~from CRthe ~~Services,~~ARLP ~~LLC;~~Partnership CRbecause ~~Machine~~the ~~Shop,~~net ~~LLC;~~income ~~certain~~is ~~properties~~first ~~and~~allocated ~~equipment~~to ofus ~~Alliance~~based ~~Resource~~on ~~Properties;~~quarterly ~~ARP~~distribution ~~Sebree,~~amounts ~~LLC; ARP Sebree South, LLC~~ and UCthen ~~Coal,~~the ~~LLC~~remaining ~~and~~undistributed ~~its~~net ~~subsidiaries,~~income UCor ~~Mining,~~losses ~~LLC~~are ~~and~~allocated UCto ~~Processing,~~us ~~LLC~~based ~~(collectively~~on ~~"UC~~our ~~Coal"). The~~percentage ~~Pattiki~~ownership ~~mine~~of ~~ceased~~ARLP's ~~production~~outstanding incommon ~~December 2016~~units. ~~The~~Our ~~Elk~~percentage ~~Creek~~ownership ~~mine~~of ~~depleted~~ARLP's ~~its~~total ~~reserves~~common inunits ~~March~~outstanding ~~2016~~increased ~~and~~as ~~ceased~~a ~~production~~result onof ~~April~~the 1,Exchange ~~2016~~Transaction. The ~~Onton~~combination ~~mine~~of ~~has~~the ~~been~~increase ~~idled~~in ~~since~~quarterly ~~the~~distributions ~~fourth~~declared ~~quarter~~by ofARLP ~~2015~~and inthe ~~response~~common tounits ~~market~~we ~~conditions. UC~~received ~~Coal~~in ~~equipment~~the ~~assets~~Exchange ~~acquired~~Transaction resulted in ~~2015~~a ~~continue~~larger distribution to beus ~~deployed~~versus asif ~~needed~~the atExchange ~~various~~Transaction ~~Illinois~~had ~~Basin~~not ~~operating mines~~occurred.

· On ~~Appalachia~~July ~~reportable~~28, ~~segment~~2017, isour ~~comprised~~wholly ofowned ~~multiple~~subsidiary, ~~operating~~MGP ~~segments,~~contributed ~~including~~to ~~the~~ARLP ~~Mettiki~~all ~~mining~~of ~~complex~~its incentive distribution rights ("~~Mettiki~~IDRs"); and its general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP. In conjunction with this transaction and on the ~~Tunnel~~same ~~Ridge~~economic basis as MGP, ~~LLC~~SGP ~~mining~~also ~~complex~~contributed ~~("Tunnel~~to ~~Ridge");~~ARLP its 0.01% general partner interests in both ARLP and the MCIntermediate ~~Mining~~Partnership in exchange for 7,181 ~~LLC~~ARLP ~~mining~~common ~~complex~~units (collectively the "MCExchange ~~Mining~~Transaction"). In ~~Mettiki~~connection ~~includes~~with ~~Mettiki~~the Exchange Transaction, ARLP amended its partnership agreement to reflect, among other things, cancellation of the IDRs and the economic general partner interests in ARLP and issuance of a non-economic general partner interest to MGP. We own directly and indirectly 87,188,338 ARLP common units and a non-economic general partner interest in ARLP. We continue to own, through MGP, a 1.0001% managing general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal. Please read "Item 1. Financial Statements (WVUnaudited), ~~LLC's~~– ~~Mountain~~Note ~~View~~1. ~~mine~~Organization and ~~Mettiki~~Presentation" ~~Coal,~~of ~~LLC's~~this ~~preparation~~Quarterly ~~plant~~Report on Form 10-Q for more information on the Exchange Transaction.

· Other and Corporate includes marketing and administrative expenses; Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC ("Matrix Design") and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD; Alliance Design Group, LLC; ASI's ownership of aircraft; the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities; Alliance Coal's coal brokerage activity; Mid-America Carbonates, LLC's manufacturing and sales (primarily to the ARLP Partnership's mines) of rock dust; certain of Alliance Resource Properties' land and mineral interest activities; Pontiki Coal, LLC's throughput receivables and legacy workers' compensation and pneumoconiosis liabilities; Wildcat Insurance, LLC; Alliance Minerals, LLC ("Alliance Minerals"), which holds direct equity investments in AllDale Minerals III, LP ("AllDale III"), and its affiliate, Cavalier Minerals JV, LLC ("Cavalier Minerals"), which holds equity investments in AllDale Minerals, LP and AllDale Minerals II, LP (collectively with AllDale III, the "AllDale Partnerships"), AROP Funding, LLC ("AROP Funding") and the ARLP Partnership's new subsidiary formed March 30, 2017, Alliance Resource Finance Corporation ("Alliance Finance"). On July 19, 2017, Alliance Minerals purchased $100 million of Series A Preferred Interests from Kodiak Gas Services, LLC ("Kodiak"). Please read "Item 1. Financial Statements (Unaudited) – Note 6. Long-term Debt", "– Note 7. Variable Interest Entities" and "– Note 8. Investments" of this Quarterly Report on Form 10-Q for more information on AROP Funding, Alliance Finance, Alliance Minerals, Cavalier Minerals, the AllDale Partnerships and Kodiak.


	Three Months Ended March 31,
	2018		2017		2018		2017
	(in thousands)				(per ton sold)
Tons sold		9,398		9,610		N/A		N/A
Tons produced		10,482		10,218		N/A		N/A
Coal sales	$	423,610	$	438,744	$	45.07	$	45.65
Operating expenses and outside coal purchases	$	278,612	$	262,027	$	29.65	$	27.27

~~Three~~Coal ~~Months~~sales. Coal ~~Ended~~sales ~~September 30~~decreased $15.1 million or 3.4% to $423.6 million for the 2018 Quarter from $438.7 million for the 2017 Quarter. The decrease was attributable to a volume variance of $9.7 million resulting from reduced tons sold and a price variance of $5.4 million due to lower average coal sales prices. Lower sales volumes in the 2018 Quarter reflect weather-related transportation disruptions, particularly at the Tunnel Ridge and Hamilton mines, partially offset by an increased sales performance at the Warrior and River View mines compared to the 2017 ~~Compared~~Quarter. As anticipated, average coal sales prices decreased $0.58 per ton sold in the 2018 Quarter to ~~Three~~$45.07 ~~Months~~compared ~~Ended~~to ~~September 30~~$45.65 per ton sold in the 2017 Quarter, ~~2016~~ primarily as a result of the expiration of higher-priced legacy contracts offset in part by higher price realizations at the Hamilton, MC Mining and Tunnel Ridge mines. Coal production volumes increased 2.6% to 10.5 million tons in the 2018 Quarter compared to 10.2 million tons in the 2017 Quarter.

~~We reported~~Operating ~~net~~expenses ~~income~~and ~~attributable~~outside ~~to AHGP~~coal ~~of $39~~purchases.1 Operating ~~million~~expenses ~~for~~and ~~the~~outside ~~three~~coal ~~months~~purchases ~~ended~~increased ~~September~~6.3% ~~30, 2017 ("2017 Quarter") compared~~ to $48278.56 million for the ~~three~~2018 ~~months ended September 30, 2016 ("2016~~ Quarter~~"). The~~ ~~decrease~~from of $9262.40 million ~~was~~for ~~principally~~the ~~due~~2017 toQuarter ~~lower revenues resulting from reduced coal sales volumes~~ and ~~prices. Lower revenues were offset in part by reduced~~ operating expenses and ~~depreciation,~~outside ~~depletion~~coal ~~and~~purchases ~~amortization,~~per ~~increased~~ton ~~income from the ARLP Partnership's investments in oil and gas mineral interests and compression services and by~~ increased ~~quarterly~~$2.38 ~~cash~~per ~~distributions~~ton ~~received~~sold ~~from~~to ~~ARLP which~~$29.65 incompared ~~turn, increased net income allocations~~ to ~~us from the ARLP Partnership by~~ $527.227 ~~million. Operating~~per ~~expenses~~ton ~~decreased~~sold ~~compared~~in to the ~~2016~~2017 Quarter, primarily asdue ato ~~result~~an ofincreased ~~decreased~~sales ~~coal~~mix ~~sales~~of ~~volumes~~higher-cost production in the ~~2017~~2018 Quarter ~~and~~resulting ~~the~~from ~~continuing~~weather-related ~~benefits~~transportation ofdisruptions at the ~~ARLP~~Tunnel ~~Partnership's~~Ridge ~~initiatives~~and toHamilton ~~shift~~longwall ~~production to lower-cost~~ operations, ~~partially~~and ~~offset~~reduced byrecoveries ~~the impact of adverse geological conditions encountered~~ at ~~the~~several ~~Hamilton mine in the 2017 Quarter~~mines. ~~Results~~ The ~~presented~~most ~~for~~significant ~~the~~operating ~~2016~~expense ~~Quarter~~variances ~~have~~by ~~been~~category ~~recast~~are todiscussed ~~reflect a reclassification~~ below:

Material and supplies expenses per ton produced increased 15.6% to $10.18 per ton in the 2018 Quarter from $8.81 per ton in the 2017 Quarter. The increase of $1.37 per ton produced resulted primarily from increases of

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of$0.45 ~~depreciation~~per ~~and~~ton ~~depletion~~for ~~capitalized~~contract ~~into~~labor ~~coal~~used ~~inventory~~in asthe anmining ~~adjustment~~process, to$0.37 ~~depreciation~~per ton for roof support, ~~depletion~~$0.27 per ton for power and ~~amortization~~fuel ~~rather~~used ~~than~~in ~~operating~~the ~~expenses~~mining process and $0. 13 per ton for other outside services; and

~~Regarding~~· ~~our~~Production ~~increase~~taxes inand ~~net~~royalty ~~income~~expenses ~~resulting~~incurred ~~from~~as ~~higher ARLP quarterly distributions, the increased distributions from ARLP resulted from (~~a) ~~ARLP’s~~percentage ~~15.4%~~of ~~higher~~coal ~~quarterly~~sales ~~unit~~prices ~~distribution rate~~ and ~~(b)~~volumes ~~the~~ increased ~~number of ARLP common units we hold resulting from the Exchange Transaction discussed below~~$0. ~~Higher~~22 ~~distributions~~per toproduced uston ~~from~~sold ~~ARLP,~~in ~~increases our income allocation from~~ the ~~ARLP~~2018 ~~Partnership~~Quarter ~~because~~compared ~~the net income is first allocated~~ to ~~us based on quarterly distribution amounts and then~~ the ~~remaining~~2017 ~~undistributed~~Quarter ~~net~~primarily ~~income or losses are allocated to us based on our percentage of ARLP’s outstanding common units. Our percentage of ARLP’s total common units outstanding increased~~ as a result of ~~the~~reduced ~~Exchange~~sales ~~Transaction. The combination~~ of ~~the~~lower ~~increase~~priced inTunnel ~~quarterly~~Ridge ~~distributions~~shipments ~~declared by ARLP and the common units we received~~ in the ~~Exchange~~2018 ~~Transaction~~Quarter ~~resulted~~due ~~in a larger distribution~~ to ustransportation ~~versus~~disruptions ifdiscussed ~~the Exchange Transaction had not occurred~~above.

~~On July 28~~Depreciation, ~~2017,~~depletion ~~our wholly-owned subsidiary, MGP contributed to ARLP all of its incentive distribution rights ("IDR")~~ and ~~its general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP~~amortization. InDepreciation, ~~conjunction~~depletion ~~with this transaction~~ and onamortization ~~the~~expense ~~same~~decreased ~~economic basis as MGP, SGP also contributed~~ to ~~ARLP its 0~~$61.~~01%~~8 ~~general~~million ~~partner interests~~ in ~~both~~the ~~ARLP~~2018 ~~and~~Quarter ~~the~~from ~~Intermediate~~$65.1 ~~Partnership~~million in ~~exchange for 7,181 ARLP common units (collectively~~ the ~~"Exchange~~2017 ~~Transaction")~~Quarter. In The ~~connection~~decrease ~~with the Exchange Transaction, ARLP amended its partnership agreement to reflect, among other things, cancellation~~ of ~~the IDRs and the economic general partner interests in ARLP and issuance of a non-economic general partner interest to MGP~~$3. We3 ~~own~~million ~~directly~~resulted ~~and~~primarily ~~indirectly~~from ~~87,188,338~~the ~~ARLP~~previously ~~common~~mentioned ~~units~~decrease ~~and a non-economic general partner interest~~ in ~~ARLP. We~~sales ~~continue~~volumes toat ~~own, through MGP, a 1.0001% managing general partner interest in~~ the ~~Intermediate~~Tunnel ~~Partnership~~Ridge ~~and~~mine ~~a 0.001% managing member interest~~ in ~~Alliance Coal. Please read "Item 1. Financial Statements (Unaudited) – Note 1. Organization and Presentation" of this Quarterly Report on Form 10-Q for more information on~~ the ~~Exchange~~2018 ~~Transaction~~Quarter.

	Three Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)				(per ton sold)
Tons sold		9,645		10,757		N/A		N/A
Tons produced		8,521		8,512		N/A		N/A
Coal sales	$	435,162	$	533,817	$	45.12	$	49.63
Operating expenses and outside coal purchases	$	295,385	$	328,405	$	30.63	$	30.53

Settlement gain. During the 2018 Quarter, the ARLP Partnership finalized an agreement with a customer and certain of its affiliates to settle litigation initiated by the ARLP Partnership in 2015. The agreement provided for a $93.0 million cash payment to the ARLP Partnership in the 2018 Quarter, future conditional coal supply commitments, continued export transloading capacity for the ARLP Partnership's Appalachian mines and the rights to acquire certain coal reserves near the ARLP Partnership's Tunnel Ridge operation. A settlement gain of $80.0 million was recorded in the 2018 Quarter reflecting the cash payment received net of $13.0 million of legal fees and associated incentive compensation.

~~Coal~~Interest ~~sales~~expense. ~~Coal~~ Interest ~~sales~~expense, ~~decreased~~net ~~$98.6~~of ~~million~~capitalized orinterest, ~~18.5%~~increased to $~~435~~10.29 million ~~for~~in the ~~2017~~2018 Quarter from $~~533~~7.85 million ~~for~~in the ~~2016~~2017 Quarter~~. The~~ ~~decrease~~primarily ~~was attributable to a volume variance of $55.2 million resulting from reduced tons sold and a price variance of $43.4 million~~ due to ~~lower~~interest ~~average~~incurred ~~coal~~under ~~sales~~the ~~prices. Reduced~~ARLP ~~tons~~Partnership's ~~sold~~Senior ~~reflect~~Notes ~~significantly~~issued ~~higher~~in ~~sales~~April ~~from~~2017 ~~coal~~offset ~~inventory~~ in ~~the~~part ~~2016~~by ~~Quarter~~reduced ~~due~~borrowings tounder ~~sizable~~the ~~contract~~ARLP ~~deferrals~~Partnership's byrevolving ~~our~~credit ~~customers~~facility inand the ~~first~~payment ~~half~~ of ~~2016 and~~ the ~~absence~~ARLP ofPartnership's ~~sales~~Series atB ~~the~~Senior ~~Pattiki~~Notes ~~mine (which was closed~~ in the ~~fourth quarter of 2016) during the~~ 2017 Quarter. ~~Average~~Total ~~coal~~debt ~~sales~~was ~~prices decreased~~ $~~4.51~~440 ~~per~~million ~~ton~~and ~~sold in the 2017 Quarter to~~ $~~45.12~~525 ~~compared~~million ~~to $49.63 per ton sold in the 2016 Quarter, primarily~~ as ~~a result~~ of ~~the~~March ~~expiration~~31, of2018 ~~higher-priced~~and ~~legacy contracts~~2017, ~~offset~~respectively. Interest inpayable ~~part~~under ~~by higher price realizations at~~ the ~~Mettiki~~ARLP ~~mine~~Partnership's ~~from~~Senior ~~its~~Notes, ~~participation~~revolving incredit ~~the~~facility ~~metallurgical coal markets~~ and ~~improved~~Series ~~prices~~B atSenior ~~the~~Notes MCis ~~Mining~~discussed ~~mine~~below inunder ~~the~~"–Debt ~~2017 Quarter~~Obligations. ~~Total production in the 2017 Quarter was comparable to the 2016 Quarter.~~"

~~Operating~~Equity ~~expenses~~securities ~~and outside coal purchases~~income. ~~Operating~~ Distributions ~~expenses~~of ~~and~~additional ~~outside~~preferred ~~coal~~interests ~~purchases~~received ~~decreased~~from ~~10.1%~~the toARLP ~~$295.4~~Partnership's ~~million~~recent ~~for~~Kodiak ~~the~~investment ~~2017~~contributed ~~Quarter from~~ $~~328~~3.47 million ~~for the 2016 Quarter primarily as a result~~ of ~~decreased~~equity ~~coal~~securities ~~sales~~income ~~volumes~~during in the ~~2017~~2018 Quarter. OnPlease aread ~~per~~"Item ~~ton~~1. ~~basis,~~Financial ~~operating~~Statements ~~expenses~~(Unaudited) ~~and~~– ~~outside~~Note ~~coal purchases increased slightly to $30~~9.63 ~~per~~Investments" ~~ton~~of ~~sold~~this ~~from~~Quarterly ~~$30.53~~Report ~~per~~on ~~ton~~Form sold in the 2016 Quarter, due primarily to the previously discussed adverse geological conditions encountered at the Hamilton mine in the 2017 Quarter, partially offset by the ARLP Partnership's initiatives to shift production to lower10-~~cost~~Q ~~operations. The~~for ~~most~~more ~~significant~~information ~~operating~~on ~~expense variances by category are discussed below:~~Kodiak.

· Transportation ~~Material~~revenues and ~~supplies~~ expenses. Transportation ~~per~~revenues ~~ton~~and ~~produced~~expenses ~~increased~~were 7$19.3%8 tomillion and $109.646 ~~per~~million ~~ton~~for in the 2018 and 2017 ~~Quarter~~Quarters, ~~from~~respectively. The increase of $910.922 ~~per~~million ~~ton~~was primarily attributable to increased tonnage for which the ARLP Partnership arranges third-party transportation at certain mines and an increase in average third-party transportation rates in the ~~2016~~2018 Quarter. both primarily due to increased export shipments. The ~~increase~~cost of ~~$0.72~~third-party ~~per~~transportation ~~ton~~services ~~produced~~are ~~resulted~~passed ~~primarily~~through ~~from~~to ~~increases~~the ofARLP $0Partnership's customers.36

Net income attributable to noncontrolling interests. The net income attributable to noncontrolling interest was $51.8 and $49.6 million for the 2018 and 2017 Quarters, respectively. The difference of $2.2 million is due to increased net income partially offset by the decreased percentage allocation of AHGP's net income to noncontrolling interests as a result of the Exchange Transaction discussed above.

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~~per~~ Segment ~~ton~~Adjusted ~~for~~EBITDA. Our ~~contract~~2018 ~~labor~~Quarter ~~used~~Segment inAdjusted ~~the~~EBITDA ~~mining~~decreased ~~process~~$28.3 million, or 14.6%, to $0165.293 ~~per~~million ~~ton~~from ~~for~~the ~~roof~~2017 ~~support~~Quarter ~~and~~Segment Adjusted EBITDA of $0193.136 ~~per~~million. Segment ~~ton~~Adjusted ~~for~~EBITDA, ~~certain~~tons ~~ventilation expenses~~sold, ~~partially~~coal ~~offset~~sales, byother asales ~~decrease~~and ofoperating ~~$0.09~~revenues ~~per~~and ~~ton~~Segment inAdjusted ~~longwall~~EBITDA ~~subsidence~~Expense ~~expense;~~by ~~and~~segment are:

· Maintenance expenses per ton produced increased 13.9% to $3.61 per ton in the 2017 Quarter from $3.17 per ton in the 2016 Quarter. The increase of $0.44 per ton produced was primarily due to increased maintenance expenses at several mines in both reportable segments.


	Three Months Ended
	March 31,
	2018		2017		Increase (Decrease)
	(in thousands)
Segment Adjusted EBITDA
Illinois Basin	$	94,830	$	106,263	$	(11,433)	(10.8)	%
Appalachia		53,621		73,187		(19,566)	(26.7)	%
Other and Corporate		18,906		16,386		2,520	15.4	%
Elimination		(2,105)		(2,221)		116	5.2	%
Total Segment Adjusted EBITDA (1)	$	165,252	$	193,615	$	(28,363)	(14.6)	%

Tons sold
Illinois Basin		7,008		6,665		343	5.1	%
Appalachia		2,390		2,930		(540)	(18.4)	%
Other and Corporate		181		342		(161)	(47.1)	%
Elimination		(181)		(327)		146	44.6	%
Total tons sold		9,398		9,610		(212)	(2.2)	%

Coal sales
Illinois Basin	$	276,065	$	266,928	$	9,137	3.4	%
Appalachia		145,289		167,773		(22,484)	(13.4)	%
Other and Corporate		7,711		15,248		(7,537)	(49.4)	%
Elimination		(5,455)		(11,205)		5,750	51.3	%
Total coal sales	$	423,610	$	438,744	$	(15,134)	(3.4)	%

Other sales and operating revenues
Illinois Basin	$	569	$	772	$	(203)	(26.3)	%
Appalachia		829		730		99	13.6	%
Other and Corporate		16,533		15,276		1,257	8.2	%
Elimination		(4,290)		(4,113)		(177)	(4.3)	%
Total other sales and operating revenues	$	13,641	$	12,665	$	976	7.7	%

Segment Adjusted EBITDA Expense
Illinois Basin	$	181,803	$	161,437	$	20,366	12.6	%
Appalachia		92,498		95,317		(2,819)	(3.0)	%
Other and Corporate		12,798		17,838		(5,040)	(28.3)	%
Elimination		(7,640)		(13,098)		5,458	41.7	%
Total Segment Adjusted EBITDA Expense (1)	$	279,459	$	261,494	$	17,965	6.9	%

~~Operating~~(1) ~~expenses~~For a definition of Segment Adjusted EBITDA and ~~outside~~Segment ~~coal~~Adjusted ~~purchases~~EBITDA ~~per~~Expense ~~ton~~and ~~increases~~related ~~discussed~~reconciliations ~~above~~to ~~were~~comparable ~~partially~~generally ~~offset~~accepted byaccounting ~~the~~principles ~~following~~("GAAP") ~~decreases:~~ financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses."

· Illinois ~~Labor~~Basin ~~and~~– ~~benefit~~Segment Adjusted EBITDA decreased 10.8% to $94.8 million in the 2018 Quarter from $106.3 million in the 2017 Quarter. The decrease of $11.5 million was primarily attributable to increased operating expenses ~~per~~partially ~~ton~~offset ~~produced,~~by ~~excluding~~higher ~~workers'~~coal ~~compensation~~sales, ~~decreased~~which 6increased 3.74% to $10276.081 ~~per~~million ~~ton~~ in the ~~2017~~2018 Quarter from $10266.809 ~~per~~million ~~ton~~ in the ~~2016~~2017 Quarter. The ~~This~~increase ~~decrease~~ of $9.2 million in coal sales reflects higher coal sales volumes of 7.0 million tons sold in the 2018 Quarter compared to 6.727 ~~per~~million ~~ton~~tons ~~was~~sold in the 2017 Quarter, primarily ~~attributable~~due to increased ~~lower~~sales ~~health~~volumes ~~care~~at ~~benefit~~the ~~expenses; and~~

· Production taxes and royalty expenses incurred as a percentage of coal sales prices and volumes decreased $0.15 per produced ton sold in the 2017 Quarter compared to the 2016 Quarter primarily as a result of lower excise taxes per ton resulting from a favorable state production mix, increased export sales and lower average coal sales prices as discussed above.

General and administrative. General and administrative expenses for the 2017 Quarter decreased to $15.4 million compared to $19.0 million in the 2016 Quarter. The decrease of $3.6 million was primarily due to lower incentive compensation expenses.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense decreased to $70.0 million in the 2017 Quarter from $101.4 million in the 2016 Quarter. The decrease of $31.4 million resulted primarily from the closure of the Pattiki mine in the fourth quarter of 2016 and reduced sales volumes at other Illinois Basin mines.

Interest expense. Interest expense, net of capitalized interest, increased to $10.8 million in the 2017 Quarter from $8.0 million in the 2016 Quarter primarily due to interest incurred under the $400 million senior unsecured notes due 2025 (the "ARLP Senior Notes") issued by ARLP in April 2017 offset in part by reduced borrowings under the ARLP revolving credit facility and the payment of the ARLP Term Loan and ARLP Series B Senior Notes. Interest payable under the ARLP Senior Notes, ARLP revolving credit facility, ARLP Term Loan and ARLP Series B Senior Notes is discussed below under "–Debt Obligations."

Equity in income of affiliates. Equity in income of affiliates increased $2.7 million in the 2017 Quarter compared to the 2016 Quarter due to increased income from the ARLP Partnership's investments in the AllDale Partnerships.

Cost investment income. Distributions of additional preferred interests received from the ARLP Partnership's new Kodiak investment contributed $2.8 million of cost investment income to the 2017 Quarter. Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.

Net income attributable to noncontrolling interests. The net income attributable to noncontrolling interest was $21.8 and $40.3 million for the 2017 and 2016 Quarters, respectively. The difference of $18.5 million is due to the decrease in the consolidated net income of the ARLP Partnership resulting from the changes in revenues and expenses described above and an increased percentage allocation of the ARLP Partnership's net income to AHGP due to increased cash distributions from ARLP as a result of the Exchange Transaction discussed above.

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~~Segment~~Warrior ~~Adjusted~~and ~~EBITDA~~River View mines, partially offset by lower average coal sales prices of $39. ~~Our~~39 in the 2018 Quarter compared to $40.05 in the 2017 Quarter. Reduced coal sales price realizations in the 2018 Quarter reflect the expiration of higher-priced legacy contracts. Segment Adjusted EBITDA ~~decreased~~Expense increased 12.6% to $60181.28 million, orin ~~27.7%,~~the to2018 Quarter from $~~157~~161.14 million ~~from~~in the ~~2016~~2017 Quarter due to increased sales volumes and higher expenses per ton. Segment Adjusted EBITDA ofExpense per ton increased $~~217~~1.372 ~~million~~per ton sold to $25. ~~Segment~~94 ~~Adjusted~~from ~~EBITDA,~~$24.22 ~~tons~~per ton sold in the 2017 Quarter, ~~coal~~primarily ~~sales~~due to lower recoveries at the Gibson South, ~~other~~River ~~sales~~View and ~~operating~~Dotiki ~~revenues~~mines, increased roof support and ~~Segment~~contract ~~Adjusted~~labor ~~EBITDA~~costs ~~Expense~~per byton ~~segment~~at ~~are:~~all of the Illinois Basin mines and reduced sales of lower cost per ton Hamilton shipments in the 2018 Quarter due to transportation disruptions discussed above.

	Three Months Ended
	September 30,
	2017		2016		Increase (Decrease)
	(in thousands)
Segment Adjusted EBITDA
Illinois Basin	$	86,377	$	145,424	$	(59,047)	(40.6)	%
Appalachia		55,465		58,497		(3,032)	(5.2)	%
Other and Corporate		17,445		16,160		1,285	8.0	%
Elimination		(2,222)		(2,814)		592	21.0	%
Total Segment Adjusted EBITDA (1)	$	157,065	$	217,267	$	(60,202)	(27.7)	%
Tons sold
Illinois Basin		6,872		7,853		(981)	(12.5)	%
Appalachia		2,773		2,855		(82)	(2.9)	%
Other and Corporate		527		593		(66)	(11.1)	%
Elimination		(527)		(544)		17	3.1	%
Total tons sold		9,645		10,757		(1,112)	(10.3)	%
Coal sales
Illinois Basin	$	278,739	$	372,879	$	(94,140)	(25.2)	%
Appalachia		151,882		151,952		(70)	(0.0)	%
Other and Corporate		24,378		27,252		(2,874)	(10.5)	%
Elimination		(19,837)		(18,266)		(1,571)	(8.6)	%
Total coal sales	$	435,162	$	533,817	$	(98,655)	(18.5)	%
Other sales and operating revenues
Illinois Basin	$	104	$	71	$	33	46.5	%
Appalachia		899		745		154	20.7	%
Other and Corporate		12,888		14,467		(1,579)	(10.9)	%
Elimination		(3,975)		(4,826)		851	17.6	%
Total other sales and operating revenues	$	9,916	$	10,457	$	(541)	(5.2)	%
Segment Adjusted EBITDA Expense
Illinois Basin	$	192,465	$	227,526	$	(35,061)	(15.4)	%
Appalachia		97,316		94,201		3,115	3.3	%
Other and Corporate		26,421		26,664		(243)	(0.9)	%
Elimination		(21,591)		(20,279)		(1,312)	(6.5)	%
Total Segment Adjusted EBITDA Expense (1)	$	294,611	$	328,112	$	(33,501)	(10.2)	%

Appalachia – Segment Adjusted EBITDA decreased 26.7% to $53.6 million for the 2018 Quarter from $73.2 million in the 2017 Quarter. The decrease of $19.6 million was primarily attributable to lower coal sales, which decreased 13.4% to $145.3 million in the 2018 Quarter from $167.8 million in the 2017 Quarter, partially offset by decreased operating expenses. The decrease of $22.5 million in coal sales primarily reflects reduced sales volumes of 2.4 million tons sold in the 2018 Quarter compared to 2.9 million tons sold in the 2017 Quarter, resulting from weather-related transportation disruptions at the Tunnel Ridge mine, offset in part by higher price realizations from the MC Mining and Tunnel Ridge mines. Segment Adjusted EBITDA Expense decreased 3.0% to $92.5 million in the 2018 Quarter from $95.3 million in the 2017 Quarter due to decreased sales volumes. Segment Adjusted EBITDA Expense per ton increased $6.17 per ton sold to $38.70 compared to $32.53 per ton sold in the 2017 Quarter, primarily due to higher selling expenses and lower recoveries at the MC Mining and Tunnel Ridge mines as well as an increased sales mix of higher-cost coal production from the MC Mining and Mettiki mines in the 2018 Quarter and certain cost increases described above under "-Operating expenses and outside coal purchases."

~~(1)~~ Other ~~For~~and aCorporate ~~definition~~– of Segment Adjusted EBITDA ~~and~~increased ~~Segment~~by ~~Adjusted~~$2.5 ~~EBITDA~~million ~~Expense and related reconciliations~~ to ~~comparable~~$18.9 ~~generally~~million ~~accepted~~in ~~accounting~~the ~~principles~~2018 ~~("GAAP")~~Quarter ~~financial~~compared ~~measures,~~to ~~please~~$16.4 ~~see~~million ~~below~~in ~~under~~the ~~"—Reconciliation~~2017 ofQuarter. The ~~non-GAAP~~increase ~~"Segment~~was ~~Adjusted~~primarily ~~EBITDA"~~attributable to ~~GAAP~~equity ~~"net~~security income" ~~and~~from ~~reconciliation~~Kodiak ofin ~~non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses." Results presented for Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense for~~ the ~~three~~2018 ~~months ended September 30~~Quarter, ~~2016~~partially ~~have~~offset ~~been~~by ~~recast~~reduced ~~to reflect a reclassification of depreciation and depletion capitalized into~~ coal ~~inventory~~brokerage ~~as adjustments to depreciation, depletion and amortization rather than operating expenses~~activity.

~~Illinois~~Reconciliation ~~Basin~~of –non-GAAP "Segment Adjusted EBITDA" ~~decreased 40.6%~~ to ~~$86.4~~GAAP ~~million~~"net inincome" ~~the~~and ~~2017~~reconciliation ~~Quarter from $145.4 million in the 2016 Quarter. The decrease~~ of ~~$59.0~~non-GAAP ~~million~~"Segment ~~was~~Adjusted ~~primarily~~EBITDA ~~attributable~~Expense" to ~~lower~~GAAP ~~coal~~"Operating ~~sales, which decreased~~ Expenses"

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and settlement gain. Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others. We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

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25.2% to $278.7 million in the 2017 Quarter from $372.9 million in the 2016 Quarter. The decrease of $94.2 million in coal sales primarily reflects lower average coal sales prices of $40.56 in the 2017 Quarter compared to $47.48 in the 2016 Quarter, resulting from the expiration and/or renegotiation of certain higher-priced legacy contracts and reduced sales volumes in the 2017 Quarter. Tons sold decreased 12.5% compared to the 2016 Quarter, primarily due to the closure of the Pattiki mine in the fourth quarter of 2016 and reduced sales volumes from the Dotiki and River View mines, partially offset by increased volumes at the Hamilton mine. Although total production for the 2017 Quarter was comparable to the 2016 Quarter, the 2016 Quarter included significantly higher sales from coal inventory resulting in the unfavorable comparison of sales volumes between the two quarters. Segment Adjusted EBITDA Expense decreased 15.4% to $192.5 million in the 2017 Quarter from $227.5 million in the 2016 Quarter due to reduced sales volumes. Segment Adjusted EBITDA Expense per ton decreased $0.96 per ton sold to $28.01 from $28.97 per ton sold in the 2016 Quarter, primarily due to lower selling expenses and health care benefit expenses as well as the ARLP Partnership's initiatives to shift production to lower-cost operations, partially offset by reduced recoveries across the region and adverse geological conditions encountered at the Hamilton mine in the 2017 Quarter.

Appalachia – Segment Adjusted EBITDA decreased 5.2% to $55.5 million for the 2017 Quarter from $58.5 million in the 2016 Quarter. The decrease of $3.0 million was primarily attributable to reduced sales volumes and increased operating expenses, offset in part by increased coal sales prices. Coal sales in the 2017 Quarter were comparable to the 2016 Quarter as a decrease of 2.9% in tons sold, primarily due to reduced sales volumes at the Mettiki mine, was substantially offset by higher coal sales prices, which increased 2.9% to $54.77 per ton sold compared to $53.22 per ton sold in the 2016 Quarter. The increase in coal sales prices primarily reflects higher price realizations at the Mettiki mine from its participation in the metallurgical coal markets and improved prices at the MC Mining mine in the 2017 Quarter. Segment Adjusted EBITDA Expense increased 3.3% to $97.3 million in the 2017 Quarter from $94.2 million in 2016 Quarter and Segment Adjusted EBITDA Expense per ton increased $2.09 per ton sold to $35.09 compared to $33.00 per ton sold in the 2016 Quarter, primarily due to higher selling expenses at the MC Mining and Mettiki mines and lower recoveries across the region, partially offset by lower health care benefit expenses at the MC Mining and Tunnel Ridge mines.

Other and Corporate – Segment Adjusted EBITDA increased by $1.2 million to $17.4 million in the 2017 Quarter compared to $16.2 million in the 2016 Quarter. The increase was primarily attributable to higher equity income from the AllDale Partnerships and cost investment income from Kodiak in the 2017 Quarter, partially offset by reduced intercompany coal brokerage sales.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

We reported net income attributable to AHGP of $136.7 million for the nine months ended September 30, 2017 ("2017 Period") compared to $124.7 million for the nine months ended September 30, 2016 ("2016 Period"). The increase of $12.0 million was due to increased coal sales volumes, which rose to 27.7 million tons sold in the 2017 Period compared to 26.2 million tons sold in the 2016 Period, lower depreciation, depletion and amortization, lower operating expenses, higher equity in income of affiliates from the ARLP Partnership's investments in oil and gas mineral interests and increased quarterly cash distributions received from ARLP which in turn, increased net income allocations to us from the ARLP Partnership by $10.3 million, offset in part by lower coal sales price realizations and a debt extinguishment loss of $8.1 million related to the early repayment of the ARLP Series B Senior Notes in May 2017. Total revenues decreased to $1.3 billion in the 2017 Period compared to $1.4 billion in the 2016 Period as lower coal sales prices more than offset increased sales volumes and other sales and operating revenues. Even though sales and production volumes increased for the 2017 Period, operating expenses were lower compared to the 2016 Period, reflecting the continuing benefits of the ARLP Partnership's recent initiatives to shift production to its lower-cost operations and lower health care benefit expenses. The favorable production cost mix and lower selling expenses in the 2017 Period significantly lowered operating expenses per ton sold compared to the 2016 Period. Results presented for the 2016 Period have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as an adjustment to depreciation, depletion and amortization rather than operating expenses.

Regarding our increase in net income resulting from higher ARLP quarterly distributions, the increased distributions from ARLP resulted from (a) ARLP’s higher quarterly unit distribution rate for the 2017 Period and (b) our increased number of ARLP common units held resulting from the Exchange Transaction. Higher distributions to us from

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ARLP, increases our income allocation from the ARLP Partnership because the net income is first allocated to us based on quarterly distribution amounts and then, the remaining undistributed net income or losses are allocated to us based on our percentage of ARLP’s outstanding common units. Our percentage of ARLP’s common units outstanding increased as a result of the Exchange Transaction. The combination of the increase in quarterly distributions declared by ARLP and the common units we received in the Exchange Transaction resulted in a larger distribution to us versus if the Exchange Transaction had not occurred.

	Nine Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)				(per ton sold)
Tons sold		27,721		26,177		N/A		N/A
Tons produced		28,211		25,759		N/A		N/A
Coal sales	$	1,256,168	$	1,357,578	$	45.31	$	51.86
Operating expenses and outside coal purchases	$	796,845	$	843,931	$	28.75	$	32.24

Coal sales. Coal sales decreased $101.4 million or 7.5% to $1.3 billion for the 2017 Period from $1.4 billion for the 2016 Period. The decrease was attributable to lower average coal sales prices, which reduced coal sales by $181.5 million, partially offset by the benefit of increased tons sold, which contributed $80.1 million in additional coal sales. Average coal sales prices decreased $6.55 per ton sold in the 2017 Period to $45.31 compared to $51.86 per ton sold in the 2016 Period, primarily due to the expiration of higher-priced legacy contracts, partially offset by higher price realizations at the Mettiki mine from its participation in the metallurgical coal markets in the 2017 Period. Sales and production volumes rose to 27.7 million tons sold and 28.2 million tons produced in the 2017 Period compared to 26.2 million tons sold and 25.8 million tons produced in the 2016 Period, primarily due to strong performances at the Gibson South, River View, Hamilton and Tunnel Ridge mines.

Operating expenses and outside coal purchases. Operating expenses and outside coal purchases decreased 5.6% to $796.8 million for the 2017 Period from $843.9 million for the 2016 Period primarily as a result of the previously discussed favorable production cost mix. On a per ton basis, operating expenses and outside coal purchases decreased 10.8% to $28.75 per ton sold from $32.24 per ton sold in the 2016 Period, due primarily to increased sales and production volumes and the continuing benefits from previously discussed initiatives to shift production to the ARLP Partnership's lower-cost operations. The most significant operating expense variances by category are discussed below:

· Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 16.5% to $9.26 per ton in the 2017 Period from $11.09 per ton in the 2016 Period. This decrease of $1.83 per ton was primarily attributable to lower labor and benefit costs per ton due to fewer employees resulting in part from the increased mix of lower-cost production as well as lower health care benefit expenses;

· Workers' compensation expenses per ton produced decreased to $0.49 per ton in the 2017 Period from $0.63 per ton in the 2016 Period. The decrease of $0.14 per ton produced was due to fewer employees resulting in part from the increased mix of lower-cost production, partially offset by a decrease in the discount rate used to calculate the estimated present value of future obligations and unfavorable changes in claims development;

· Material and supplies expenses per ton produced decreased 1.0% to $9.66 per ton in the 2017 Period from $9.76 per ton in the 2016 Period. The decrease of $0.10 per ton produced resulted primarily from the increased mix of lower-cost production and related decreases of $0.18 per ton for power and fuel used in the mining process and $0.07 per ton for general mining materials and supplies, partially offset by an increase of $0.23 per ton for contract labor used in the mining process; and

· Production taxes and royalty expenses decreased $0.75 per produced ton sold in the 2017 Period compared to the 2016 Period primarily as a result of lower excise taxes per ton resulting from a favorable state production mix, and lower average coal sales prices.

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Operating expenses and outside coal purchases per ton decreases discussed above were partially offset by the following increase:

· Maintenance expenses per ton produced increased 6.3% to $3.35 per ton in the 2017 Period from $3.15 per ton in the 2016 Period. The increase of $0.20 per ton produced was primarily due to increased maintenance expenses at several mines in both reportable segments.

Other sales and operating revenues. Other sales and operating revenues were principally comprised of Mt. Vernon transloading revenues, Matrix Design sales and other outside services from affiliates. Other sales and operating revenues increased to $31.6 million in the 2017 Period from $26.4 million in the 2016 Period. The increase of $5.2 million was primarily due to increased mining technology product sales by Matrix Design and increased transloading revenues from Mt. Vernon, partially offset in comparison to the 2016 Period by proceeds of coal supply contract buy-outs received in the 2016 Period.

General and administrative. General and administrative expenses for the 2017 Period decreased to $47.2 million compared to $55.2 million in the 2016 Period. The decrease of $8.0 million was primarily due to lower incentive compensation expenses.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense decreased to $194.1 million for the 2017 Period compared to $245.7 million for the 2016 Period primarily as a result of the depletion of reserves at the Elk Creek mine in the first quarter of 2016, closure of the Pattiki mine in the fourth quarter of 2016, volume reductions at the Dotiki mine, the use of surplus equipment from the ARLP Partnership's idled mines at the Warrior and River View mines and ongoing capital reduction initiatives at all of the ARLP Partnership's operations.

Interest expense. Interest expense, net of capitalized interest, increased to $28.9 million in the 2017 Period from $23.4 million in the 2016 Period primarily due to interest incurred under the ARLP Senior Notes issued in April 2017, offset in part by reduced borrowings under the ARLP revolving credit facility and the payment of the ARLP Term Loan and ARLP Series B Senior Notes. Interest payable under the ARLP Senior Notes, ARLP revolving credit facility, ARLP Term Loan and ARLP Series B Senior Notes is discussed below under "–Debt Obligations."

Equity in income of affiliates. Equity in income of affiliates increased $9.4 million in the 2017 Period compared to the 2016 Period due to increased income from the ARLP Partnership's investments in the AllDale Partnerships.

Cost investment income. Distributions of additional preferred interests received from the ARLP Partnership's new Kodiak investment contributed $2.8 million of cost investment income to the 2017 Period. Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.

Debt extinguishment loss. The ARLP Partnership recognized a debt extinguishment loss of $8.1 million in the 2017 Period to reflect a make-whole payment incurred to repay the ARLP Series B Senior Notes in May 2017.

Transportation revenues and expenses. Transportation revenues and expenses were $24.9 million and $19.7 million for the 2017 and 2016 Periods, respectively. The increase of $5.2 million was primarily attributable to increased tonnage for which the ARLP Partnership arranges third-party transportation at certain mines and an increase in average third-party transportation rates in the 2017 Period. The cost of third-party transportation services are passed through to the ARLP Partnership's customers.

Net income attributable to noncontrolling interests. The net income attributable to noncontrolling interest was $91.7 million and $92.6 million for the 2017 and 2016 Periods, respectively. The difference of $0.9 million is due to an increased percentage allocation of the ARLP Partnership's net income to AHGP due to increased cash distributions to AHGP as a result of the Exchange Transaction discussed above, partially offset by the increase in the consolidated net income of the ARLP Partnership resulting from the changes in revenues and expenses described above.

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Segment Adjusted EBITDA. Our 2017 Period Segment Adjusted EBITDA decreased $35.1 million, or 6.5%, to $506.6 million from the 2016 Period Segment Adjusted EBITDA of $541.7 million. Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are:

	Nine Months Ended
	September 30,
	2017		2016		Increase (Decrease)
	(in thousands)
Segment Adjusted EBITDA
Illinois Basin	$	285,928	$	381,042	$	(95,114)	(25.0)	%
Appalachia		179,396		143,699		35,697	24.8	%
Other and Corporate		47,948		25,555		22,393	87.6	%
Elimination		(6,664)		(8,641)		1,977	22.9	%
Total Segment Adjusted EBITDA (1)	$	506,608	$	541,655	$	(35,047)	(6.5)	%
Tons sold
Illinois Basin		19,635		18,892		743	3.9	%
Appalachia		8,071		7,236		835	11.5	%
Other and Corporate		1,350		1,248		102	8.2	%
Elimination		(1,335)		(1,199)		(136)	(11.3)	%
Total tons sold		27,721		26,177		1,544	5.9	%
Coal sales
Illinois Basin	$	789,081	$	940,843	$	(151,762)	(16.1)	%
Appalachia		453,267		402,914		50,353	12.5	%
Other and Corporate		61,951		58,074		3,877	6.7	%
Elimination		(48,131)		(44,253)		(3,878)	(8.8)	%
Total coal sales	$	1,256,168	$	1,357,578	$	(101,410)	(7.5)	%
Other sales and operating revenues
Illinois Basin	$	1,048	$	7,413	$	(6,365)	(85.9)	%
Appalachia		2,381		2,717		(336)	(12.4)	%
Other and Corporate		40,164		30,015		10,149	33.8	%
Elimination		(11,983)		(13,723)		1,740	12.7	%
Total other sales and operating revenues	$	31,610	$	26,422	$	5,188	19.6	%
Segment Adjusted EBITDA Expense
Illinois Basin	$	504,201	$	567,214	$	(63,013)	(11.1)	%
Appalachia		276,252		261,933		14,319	5.5	%
Other and Corporate		67,382		63,575		3,807	6.0	%
Elimination		(53,451)		(49,336)		(4,115)	(8.3)	%
Total Segment Adjusted EBITDA Expense (1)	$	794,384	$	843,386	$	(49,002)	(5.8)	%

(1) For a definition of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to comparable GAAP financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses." Results presented for Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense for the nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

Illinois Basin – Segment Adjusted EBITDA decreased 25.0% to $285.9 million in the 2017 Period from $381.0 million in the 2016 Period. The decrease of $95.1 million was primarily attributable to lower coal sales, which decreased 16.1%

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to $789.1 million in the 2017 Period from $940.8 million in the 2016 Period, partially offset by decreased expenses resulting from a favorable production mix. The coal sales decrease of $151.7 million primarily reflects lower average coal sales prices of $40.19 in the 2017 Period compared to $49.80 in the 2016 Period, primarily resulting from the expiration of higher-priced legacy contracts. Lower sales prices were partially offset by increased tons sold, which increased 3.9% to 19.6 million tons in the 2017 Period compared to 18.9 million tons in the 2016 Period. Higher sales volumes resulted from strong performances at the Gibson South, River View and Hamilton mines, offset in part by the previously mentioned depletion of reserves at the Elk Creek mine in the 2016 first quarter, the closure of the Pattiki mine in the 2016 fourth quarter and reduced sales at the Dotiki mine. Segment Adjusted EBITDA Expense decreased 11.1% to $504.2 million in the 2017 Period from $567.2 million in the 2016 Period and Segment Adjusted EBITDA Expense per ton decreased $4.34 per ton sold to $25.68 compared to $30.02 per ton sold in the 2016 Period, primarily due to a significant increase in low-cost longwall production from the Hamilton mine, increased production at the River View and Gibson South operations and a related reduced mix of sales volumes from the ARLP Partnership's higher cost mines, as well as reduced selling expenses, lower health care benefit expenses and certain cost decreases described above under "–Operating expenses and outside coal purchases."

Appalachia – Segment Adjusted EBITDA increased 24.8% to $179.4 million for the 2017 Period from $143.7 million in the 2016 Period. The increase of $35.7 million was primarily attributable to increased tons sold, which rose 11.5% to 8.1 million tons sold in the 2017 Period compared to 7.2 million tons sold in the 2016 Period, and lower Segment Adjusted EBITDA Expense per ton. Coal sales increased 12.5% to $453.3 million compared to $402.9 million in the 2016 Period. The increase of $50.4 million primarily resulted from increased sales volumes across the region, including increased export sales from the Mettiki and MC Mining mines and higher average coal sales prices of $56.16 in the 2017 Period compared to $55.68 in the 2016 Period. Higher price realizations in the 2017 Period were a result of sales from the Mettiki mine into the metallurgic coal export market and improved prices at the MC Mining mine. Segment Adjusted EBITDA Expense increased 5.5% to $276.3 million in the 2017 Period from $261.9 million in the 2016 Period due to increased sales volumes. However, Segment Adjusted EBITDA Expense per ton decreased $1.97 per ton sold to $34.23 compared to $36.20 per ton sold in the 2016 Period, as a result of increased production across the region, particularly at the Tunnel Ridge longwall operation resulting in part from increased longwall unit shifts and fewer longwall move days during the 2017 Period, and increased unit shifts at the MC Mining operations, as well as certain other cost decreases described above under "–Operating expenses and outside coal purchases."

Other and Corporate – Segment Adjusted EBITDA increased by $22.3 million to $47.9 million for the 2017 Period compared to $25.6 million in the 2016 Period. The increase was primarily attributable to higher equity income from the AllDale Partnerships and increased mining technology product sales by Matrix Design. In the 2017 Period, Segment Adjusted EBITDA Expense increased to $67.4 million for the 2017 Period compared to $63.6 million for the 2016 Period primarily as a result of increased brokerage activity and Matrix Design sales discussed above.

Elimination – Segment Adjusted EBITDA Expense eliminations increased in the 2017 Period to $53.5 million from $49.3 million in the 2016 Period and coal sales eliminations increased to $48.1 million from $44.3 million, reflecting increased intercompany coal sales brokerage activity.

Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses"

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and debt extinguishment loss. Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others. We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

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Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA. In addition, the exclusion of corporate general and administrative expenses from consolidated Segment Adjusted EBITDA allows management to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments. Results presented for Segment Adjusted EBITDA for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

The following is a reconciliation of consolidated Segment Adjusted EBITDA to net income, the most comparable GAAP financial measure:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	~~157~~165,~~065~~252	$	~~217~~193,~~267~~615	$	~~506,608~~	$	~~541,655~~
General and administrative		(1517,~~389~~145)		(1816,~~987~~447)		~~(47,160)~~		~~(55,175)~~
Depreciation, depletion and amortization		(6961,~~962~~848)		(~~101~~65,~~432~~127)		~~(194,109)~~		~~(245,736)~~
Interest expense, net		(10,767)		(7,998)		(28,817)		(23,375)
Settlement gain		80,000		—
Debt extinguishment loss		—		—		(8,148)		—
Interest expense, net		(10,790)		(7,491)
Income tax (expense) benefit		(4)		(6)		3		(4)
Income tax benefit		10		12
Net income	$	60155,~~943~~479	$	88104,~~844~~562	$	~~228,377~~	$	~~217,365~~

Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments. Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales and other sales and operating revenues. The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses. Results presented for Segment Adjusted EBITDA Expense for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to operating expense, the most comparable GAAP financial measure:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
	(in thousands)
Segment Adjusted EBITDA Expense	$	~~294~~279,~~611~~459	$	~~328~~261,~~112~~494	$	~~794,384~~	$	~~843,386~~
Outside coal purchases		—(1,374)		~~(1,514)~~—		—		~~(1,514)~~
Other income		774		293		2,461		545
Other (expense) income		(847)		533
Operating expenses (excluding depreciation, depletion and amortization)	$	~~295~~277,~~385~~238	$	~~326~~262,~~891~~027	$	~~796,845~~	$	~~842,417~~

Liquidity and Capital Resources

Liquidity

Subsequent to the Exchange Transaction discussed above, our only cash generating assets are limited partnership interests in the ARLP Partnership and a managing general partnership interest in the Intermediate Partnership from which we receive quarterly distributions. We rely on distributions from the ARLP Partnership to fund our cash requirements. Prior to the Exchange Transaction our cash generating assets included incentive distribution rights and a 0.99% general partnership interest, both in ARLP. Please read "Item 1. Financial Statements (Unaudited) – Note 1. Organization and Presentation" of this Quarterly Report on Form 10-Q for more information on the Exchange Transaction.

37 The ARLP Partnership has historically satisfied its working capital requirements and funded its capital expenditures, investments and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and sale-leaseback transactions. The ARLP Partnership believes that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet its working capital requirements, capital expenditures and additional investments, debt payments, commitments and distribution payments.

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~~Prior~~Nevertheless, the ARLP Partnership's ability to ~~the~~satisfy ~~Exchange~~its ~~Transaction~~working ~~our~~capital ~~cash~~requirements, ~~generating~~to ~~assets~~fund ~~included~~planned ~~incentive~~capital ~~distribution~~expenditures ~~rights~~and investments, to service its debt obligations or to pay distributions will depend upon its future operating performance and aaccess ~~0.99%~~to ~~general~~and ~~partnership~~cost ~~interest~~of financing sources, ~~both~~which will be affected by prevailing economic conditions generally and in the coal industry specifically, as well as other financial and business factors, some of which are beyond the ARLP Partnership's control. ~~Please~~Based ~~read~~on ~~"Item~~the 1.ARLP ~~Financial~~Partnership's ~~Statements~~recent ~~(Unaudited)~~operating –results, ~~Note~~current 1.cash ~~Organization~~position, current unitholder distributions, anticipated future cash flows and ~~Presentation"~~sources of financing that the ARLP Partnership expects to have available, it does not anticipate any constraints to its liquidity at this ~~Quarterly~~time. However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected. Please read "Item 1A. Risk Factors" in our Annual Report on Form 10-QK for ~~more~~the ~~information~~year onended ~~the~~December 31, ~~Exchange Transaction~~2017.

~~The~~Mine ~~ARLP~~Development Partnership has historically satisfied its working capital requirements and funded its capital expenditures, investments and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and sale-leaseback transactions. The ARLP Partnership believes that existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet its working capital requirements, capital expenditures and additional investments, debt payments, commitments and distribution payments. Nevertheless, the ARLP Partnership's ability to satisfy its working capital requirements, to fund planned capital expenditures and investments, to service its debt obligations or to pay distributions will depend upon its future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally and in the coal industry specifically, as well as other financial and business factors, some of which are beyond the ARLP Partnership's control. Based on the ARLP Partnership's recent operating results, current cash position, current unitholder distributions, anticipated future cash flows and sources of financing that the ARLP Partnership expects to have available, it does not anticipate any constraints to its liquidity at this time. However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected. Please read "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.Project

The ARLP Partnership is evaluating an investment in a new coal mine in east Kentucky as reserves deplete at its MC Mining operations in 2020. The ARLP Partnership anticipates the new mine will enable it to access an additional 15 million tons of coal reserves with an expected mine life of approximately 12 years assuming current levels of production at its MC Mining mine continue at the new mine. The ARLP Partnership estimates the capital required to complete the project would be between $50 million and $66 million, which it expects to fund with cash from operations or borrowings under the ARLP Partnership's credit facilities. If the ARLP Partnership decides to move forward with this investment, it anticipates beginning the project in the second quarter of 2018 with expected completion in 2020.

Cash Flows

Cash provided by operating activities was $~~454~~224.83 million for the ~~2017~~2018 ~~Period~~Quarter compared to $~~492~~176.06 million for the ~~2016~~2017 ~~Period~~Quarter. The ~~decrease~~increase in cash provided by operating activities was primarily due to aan ~~decrease~~increase in net income adjusted for non-cash items, anand ~~increase~~favorable inworking ~~coal~~capital ~~inventories~~changes inrelated ~~the 2017 Period compared~~ to apayroll ~~decrease~~and inrelated ~~coal~~benefits ~~inventories~~accruals ~~in the 2016 Period~~ and ~~a smaller decrease in~~ prepaid expenses and other assets ~~in the 2017 Period~~. These ~~decreases~~increases were offset in part by ~~increased~~unfavorable ~~distributions received from the AllDale Partnerships and favorable~~ working capital changes related to trade receivables, and accounts payable, ~~accrued interest and other long-term liabilities~~ in the ~~2017~~2018 ~~Period~~Quarter compared to the ~~2016~~2017 ~~Period~~Quarter.

Net cash used in investing activities was $~~205~~62.42 million for the ~~2017~~2018 ~~Period~~Quarter compared to $~~164~~35.78 million for the ~~2016~~2017 ~~Period~~Quarter. The increase in cash used in investing activities was primarily attributable to ~~the funding of the ARLP Partnership's new cost investment in Kodiak in the 2017 Period and~~ increased capital expenditures for mine infrastructure and equipment at various mines in the ~~2017~~2018 ~~Period~~Quarter compared to the ~~2016 Period. Decreased purchases of equity investments in affiliates, the lack of customer contract buy-outs in the~~ 2017 ~~Period and favorable changes in accounts payable related to property, plant and equipment purchases partially offset increases in use of cash in investing activities previously discussed~~Quarter. ~~Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.~~

Net cash used in financing activities was $~~271~~140.40 million for the ~~2017~~2018 ~~Period~~Quarter compared to $~~340~~93.12 million for the ~~2016~~2017 ~~Period~~Quarter. The ~~decrease~~increase in cash used in financing activities was primarily attributable to ~~proceeds~~increased ~~received~~overall ~~from~~net ~~the~~payments ~~issuance~~on ofthe ~~senior~~ARLP ~~notes,~~securitization ~~decreased~~and ~~payments~~revolving ~~under~~credit ~~the~~facilities ~~Term Loan~~ and aan ~~decrease~~increase in distributions paid to partners in the ~~2017~~2018 ~~Period~~Quarter compared to the ~~2016~~2017 ~~Period~~Quarter. ~~Repayment~~These ofincreases ~~the~~were ~~ARLP~~partially ~~Series~~offset Bby ~~Senior Notes, increased overall net payments on~~ the ~~ARLP Partnership's securitization and revolving credit facilities,~~ payment of debt issuance ~~and extinguishment~~ costs ~~and no proceeds received from sales-leaseback transactions~~ in the 2017 ~~Period partially offset decreases in net cash used in financing activities previously discussed~~Quarter.

Capital Expenditures

Capital expenditures increased to $~~105~~51.5 million in the ~~2017~~2018 ~~Period~~Quarter from $7030.3 million in the ~~2016~~2017 ~~Period~~Quarter. See our discussion of "Cash Flows" above concerning the increase in capital expenditures.

The ARLP Partnership's anticipated total capital expenditures for the year ending December 31, ~~2017~~2018 are estimated in a range of $~~145~~220.0 million to $~~165~~240.0 million, which includes expenditures for maintenance capital at various mines. In addition to these capital expenditures, in 2018 the ARLP Partnership anticipates funding investments of approximately $30.0 million related to its commitment to acquire oil and gas mineral interests as discussed in "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q. Management anticipates funding remaining 2018 capital requirements with cash and cash equivalents ($28.8 million as of March 31, 2018), cash flows from operations and investments, borrowings under revolving credit and securitization facilities and cash provided from the issuance of debt or equity. The ARLP Partnership will continue to have significant capital requirements over the long-term, which may require it to incur debt or seek additional equity capital. The availability and cost of additional capital will depend upon prevailing market conditions, the market price of the ARLP Partnership's common units and several other factors over which it has limited control, as well as its financial condition and results of operations.

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mines. In addition to these capital expenditures, the ARLP Partnership anticipates funding in 2017 investments of approximately $120.0 million to $130.0 million related to its commitment to acquire oil and gas mineral interests and including the ARLP Partnership's $100 million investment in Kodiak as discussed in "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q. Management anticipates funding remaining 2017 capital requirements with cash and cash equivalents ($18.4 million as of September 30, 2017), cash flows from operations, borrowings under revolving credit and securitization facilities and cash provided from the issuance of debt or equity. The ARLP Partnership will continue to have significant capital requirements over the long-term, which may require it to incur debt or seek additional equity capital. The availability and cost of additional capital will depend upon prevailing market conditions, the market price of the ARLP Partnership's common units and several other factors over which it has limited control, as well as its financial condition and results of operations.

Debt Obligations

ARLP Credit Agreement. On January 27, 2017, the Intermediate Partnership entered into a Fourth Amended and Restated Credit Agreement (the "ARLP Credit Agreement") with various financial institutions. The ARLP Credit Agreement provides for a $494.75 million revolving credit facility, ~~and~~including ~~term~~a ~~loan~~sublimit (of $125 million for the ~~"ARLP~~issuance ~~Credit~~of ~~Facility"). The~~letters ~~ARLP~~of ~~Credit~~credit ~~Facility~~and ~~replaced~~a ~~the~~sublimit of $~~250~~15.0 million ~~term~~for ~~loan~~swingline borrowings (the "ARLP ~~Replaced~~Revolving ~~Term~~Credit ~~Loan~~Facility"), ~~and~~with ~~$700~~a ~~million~~termination ~~revolving~~date ~~credit~~of ~~facility~~May ~~("ARLP~~23, ~~Replaced~~2019. The ~~Revolving~~ARLP Credit ~~Facility")~~Agreement ~~extended~~was toamended ~~the~~on ~~Intermediate~~April ~~Partnership~~3, on2017 ~~May~~to ~~23,~~extend ~~2012~~the (termination date of the "ARLP ~~Replaced~~Revolving Credit ~~Agreement")~~Facility byas ~~various~~to ~~banks~~$461.25 ~~and~~million ~~other~~of ~~lenders~~the ~~that~~$494.75 ~~would~~million ~~have~~of ~~expired~~commitments onto May 23, ~~2017~~2021 and effectuate certain other changes.

The ARLP Credit Agreement ~~provided~~is ~~for~~guaranteed aby ~~$776.5~~all ~~million revolving credit facility, reducing to $494.75 million on May 23, 2017, including a sublimit~~ of ~~$125 million for~~ the ~~issuance~~material ofdirect ~~letters of credit~~ and aindirect ~~sublimit~~subsidiaries of ~~$15.0 million for swingline borrowings (~~the ~~"ARLP~~Intermediate ~~Revolving Credit Facility")~~Partnership, and ~~for~~is asecured ~~term~~by ~~loan~~substantially ~~with~~all ~~a remaining principal balance~~ of ~~$50.0 million (~~the ~~"ARLP~~Intermediate ~~Term~~Partnership's ~~Loan")~~assets. ~~The~~Borrowings ~~outstanding revolver balance and term loan balance~~ under the ARLP ~~Replaced~~Revolving Credit ~~Agreement~~Facility ~~was~~bear ~~considered~~interest, ~~advanced~~at ~~under~~ the ~~ARLP~~option ~~Credit~~of ~~Facility~~the onIntermediate ~~January 27~~Partnership, ~~2017. On~~at ~~April~~either 3,(i) ~~2017,~~ the ~~ARLP~~Base ~~Partnership~~Rate ~~entered~~at ~~into~~the angreater ~~amendment~~of tothree ~~the~~benchmarks ~~ARLP~~or ~~Credit Agreement~~ (~~the "Amendment"~~ii) ~~to (~~a) ~~extend~~Eurodollar ~~the~~Rate, ~~termination~~plus ~~date~~margins offor ~~the~~(i) ~~ARLP~~or ~~Revolving~~(ii), ~~Credit Facility~~ as ~~to $461.25 million of commitments to May 23~~applicable, ~~2021,~~that ~~(b)~~fluctuate ~~eliminate~~depending upon the ~~Cavalier~~ratio ~~Condition~~of ~~and~~Consolidated ~~the~~Debt ~~ARLP~~to ~~Senior~~Consolidated ~~Notes~~Cash ~~Condition~~Flow (~~both~~each as defined in the ARLP Credit Agreement) ~~and (c) effectuate certain other changes~~. InThe ~~connection~~Eurodollar Rate, with ~~the~~applicable ~~Amendment~~margin, under the ~~ARLP~~Credit ~~Partnership~~Facility ~~increased~~was ~~the~~4.07% ~~commitments~~as ~~under~~of ~~the~~March ~~ARLP~~31, ~~Revolving~~2018. At ~~Credit~~March ~~Facility~~31, ~~from~~2018, ~~$479.75~~the ~~million~~ARLP toPartnership had $~~494~~8.751 million, ~~effective~~of ~~May~~letters ~~23,~~of ~~2017~~credit ~~(of~~outstanding ~~which~~with $33486.57 million ~~expire~~available onfor ~~May~~borrowing ~~23,~~under ~~2019)~~the ARLP Revolving Credit Facility. The ARLP Partnership ~~incurred~~currently ~~debt~~incurs ~~issuance~~an ~~costs~~annual incommitment ~~2017~~fee of $80.935% ~~million~~on inthe ~~connection~~undrawn ~~with~~portion of the ARLP Revolving Credit ~~Agreement~~Facility. ~~These~~ The ~~debt~~ARLP ~~issuance~~Partnership ~~costs~~utilizes ~~are~~the ~~deferred~~ARLP ~~and~~Revolving ~~are~~Credit ~~being~~Facility, ~~amortized~~ as aappropriate, ~~component~~for ofworking ~~interest~~capital ~~expense~~requirements, ~~over~~capital ~~the~~expenditures ~~term~~and ofinvestments, ~~the~~scheduled ~~ARLP~~debt ~~Credit~~payments ~~Facility~~and distribution payments.

The ARLP Credit Agreement iscontains ~~guaranteed~~various byrestrictions ~~all~~affecting of the ~~material~~Intermediate ~~direct~~Partnership and ~~indirect~~its subsidiaries including, among other things, restrictions on incurrence of ~~the~~additional ~~Intermediate~~indebtedness ~~Partnership~~and liens, sale of assets, investments, mergers and isconsolidations ~~secured~~and bytransactions ~~substantially~~with ~~all~~affiliates, in each case subject to various exceptions, and the payment of cash distributions by the Intermediate Partnership’s ~~assets~~if such payment would result in a certain fixed charge coverage ratio (as defined in the Credit Agreement). See "Item 1. Financial Statements (Unaudited) – Note 8. Variable Interest Entities" of this Quarterly Report on Form 10-Q for further discussion of restrictions on the cash available for distribution. The ARLP ~~Term~~Credit ~~Loan~~Agreement ~~principal~~requires ~~balance~~the Intermediate Partnership to maintain (a) a debt to cash flow ratio of ~~$50~~not more than 2.5 to 1.0 ~~million~~and ~~was~~(b) ~~paid~~a cash flow to interest expense ratio of not less than 3.0 to 1.0, in ~~full~~each case, during the four most recently ended fiscal quarters. The debt to cash flow ratio and cash flow to interest expense ratio were 0.75 to 1.0 and 16.0 to 1.0, respectively, for the trailing twelve months ended March 31, 2018. The ARLP Partnership remains in ~~May~~compliance ~~2017~~with the covenants of the ARLP Credit Agreement as of March 31, 2018.

~~Borrowings~~ARLP ~~under~~Senior Notes. On April 24, 2017, the ~~ARLP~~Intermediate ~~Credit~~Partnership ~~Facility~~and ~~bear~~Alliance ~~interest~~Finance (as co-issuer), ata ~~the~~wholly ~~option~~owned subsidiary of the Intermediate Partnership, atissued ~~either~~an ~~(i)~~aggregate ~~the~~principal ~~Base~~amount ~~Rate~~of at$400.0 ~~the~~million ~~greater~~ of ~~three~~senior ~~benchmarks~~unsecured ornotes due 2025 (iithe "ARLP Senior Notes") in a ~~Eurodollar~~private ~~Rate,~~placement ~~plus~~to ~~margins~~qualified ~~for~~institutional ~~(i)~~buyers. The orARLP ~~(ii),~~Senior asNotes ~~applicable~~have a term of eight years, ~~that~~maturing ~~fluctuate~~on ~~depending~~May ~~upon~~1, 2025 (the ~~ratio~~"Term") ofand ~~Consolidated~~accrue ~~Debt~~interest toat ~~Consolidated~~an ~~Cash~~annual ~~Flow~~rate ~~(each~~of as7.5%. Interest ~~defined~~is payable semi-annually in ~~the~~arrears ~~ARLP~~on ~~Credit~~each ~~Agreement)~~May 1 and November 1. The indenture governing the ARLP ~~Partnership~~Senior ~~elected~~Notes acontains ~~Eurodollar~~customary ~~Rate~~terms, ~~which~~events of default and covenants relating to, ~~with~~among ~~applicable~~other ~~margin~~things, ~~was~~the ~~3.59%~~incurrence asof debt, the payment of ~~September~~distributions 30or similar restricted payments, ~~2017~~undertaking transactions with affiliates and limitations on asset sales. At ~~September~~any 30time prior to May 1, ~~2017~~2020, the issuers of the ARLP ~~Partnership~~Senior ~~had~~Notes ~~$8.1~~may ~~million~~redeem up to 35% of ~~letters~~the aggregate principal amount of ~~credit~~the ~~outstanding~~ARLP Senior Notes with ~~$486.7~~the ~~million~~net ~~available~~cash ~~for~~proceeds ~~borrowing~~of ~~under~~one ~~the~~or ~~ARLP~~more ~~Revolving~~equity ~~Credit~~offerings ~~Facility~~at a redemption price equal to 107.5% of the principal amount redeemed, plus accrued and unpaid interest, if any, to the redemption date. The issuers of the ARLP ~~Partnership~~Senior ~~currently~~Notes ~~incurs an~~may ~~annual~~also ~~commitment~~redeem ~~fee~~all or a part of ~~0.35%~~the notes at any time on or after May 1, 2020, at redemption prices set forth in the ~~undrawn~~indenture ~~portion~~governing the ARLP Senior Notes. At any time prior to May 1, 2020, the issuers of the ARLP ~~Revolving~~Senior ~~Credit~~Notes ~~Facility. The~~may redeem the ARLP ~~Partnership~~Senior ~~utilizes~~Notes at a redemption price equal to the ~~ARLP~~principal ~~Revolving~~amount ~~Credit~~of ~~Facility,~~the asARLP ~~appropriate,~~Senior ~~for~~Notes ~~working~~plus ~~capital~~a ~~requirements~~"make-whole" premium, ~~capital~~plus ~~expenditures~~accrued and ~~investments~~unpaid ~~in affiliates~~interest, ~~scheduled~~if ~~debt~~any, ~~payments~~to ~~and~~the ~~distribution~~redemption ~~payments~~date.

~~The~~ ARLP ~~Credit~~Accounts ~~Agreement~~Receivable ~~contains~~Securitization. ~~various~~On ~~restrictions~~December ~~affecting the Intermediate Partnership and its subsidiaries including~~5, ~~among other things~~2014, ~~incurrence~~certain ofdirect ~~additional indebtedness~~ and ~~liens,~~indirect ~~sale~~wholly ofowned ~~assets,~~subsidiaries ~~investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions, and the payment~~ of ~~cash distributions by~~ the Intermediate Partnership ifentered ~~such~~into ~~payment would result in~~ a ~~certain~~$100.0 ~~fixed~~million ~~charge~~accounts ~~coverage~~receivable ~~ratio~~securitization ~~(as~~facility ~~defined in the~~ ("ARLP ~~Credit~~Securitization ~~Agreements~~Facility"). ~~The~~Under ~~Amendment~~the ~~lowered~~ARLP ~~this~~Securitization ~~fixed~~Facility, ~~charge~~certain ~~ratio~~subsidiaries ~~from~~sell ~~less~~trade ~~than~~receivables ~~1.25~~on ~~to 1.0 to 1.15 to 1.0 for each rolling four-quarter period and further limited the Intermediate Partnership’s ability to incur certain~~

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~~unsecured~~an ~~debt.~~ongoing ~~The~~basis ~~Amendment~~to ~~raised~~ the ~~debt~~Intermediate toPartnership, ~~cash~~which ~~flow~~then ~~ratio~~sells ~~from~~the ~~2.25~~trade toreceivables ~~1.0~~ to ~~2.50~~AROP toFunding, ~~1.0~~a ~~and~~wholly owned ~~also~~bankruptcy-remote ~~removed~~special ~~the~~purpose ~~requirement~~subsidiary ~~for~~of the Intermediate Partnership, towhich ~~remain~~ in ~~control~~turn ofborrows on a ~~certain~~revolving ~~amount~~basis ofup ~~mineable~~to ~~coal~~$100.0 ~~reserves~~million ~~relative~~secured toby ~~its~~the ~~annual~~trade ~~production~~receivables. ~~The~~After ~~ARLP Credit Agreements require~~ the ~~Intermediate~~sale,

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